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Apartment Real Estate Investing for Inflation Protection

Worried about inflation? Governments around the world have reduced interest rates to record low levels. While this may help spur the world economy back towards growth, the long term risk is that inflation returns.  Investors and savers need to protect the purchasing power of their capital and at the same time earn a reasonable rate of return.  With the currently low rates available on savings account deposits, money market funds and bonds, investors need to look to alternative investments to satisfy both of these needs.  While gold holds the prospect of hedging against inflation, it is a highly volatile investment that provides no income. Meanwhile, traditional fixed income investments like deposits, bonds and mortgages are vulnerable to inflation which eat away at the value of your capital. Even inflation protected bonds, like the Government of Canada Real Return Bond provide very low real returns, and are very tax inefficient.

Apartment buildings are real hard assets and offer investors protection against inflation because rents tend to rise with inflation over the long term.  Apartments can be partly financed with low cost debt that is repaid with inflated dollars down the road, and because of this, investors get the added benefit of owning an asset that rises with inflation and owing to others (i.e. the bank or mortgage investor) something which is going down in value with inflation (the mortgage).  Centurion Apartment Real Estate Investment Trust invests in safe Canadian apartment buildings.  It distributes a tax efficient yield on a monthly basis, meaning that you keep more of your returns after tax.

So why hold gold which gives no cash flow or or low return inflation protected bonds as your inflation hedge when you could own apartment buildings which provide both inflation protection and income, without the hassle of daily management?  This website has many free resources for investors interested in real estate, apartment investing, and inflation protection to explore.