What if Inflation Goes Crazy?
Apr 21, 2021Right now, interest rates – and inflation – have been tame for so long that I wonder if we are not really considering a possible imminent outcome, which is that due to all the government spending, inflation goes kind of crazy to the upside. If so, have you considered what would happen to your investments in real estate? Would it hurt your existing deals by reducing the value of what you own? Would it cause defaults on indebtedness? Would your borrowers not be able to make their payments? Would your tenants not be able to pay their rent? Are there CPI hurdles in the documentation that would harm your investments? Would other negative outcomes ensue? To be clear, I am NOT predicting that that will happen. Trying to think ahead, I know I don’t know whether there will be inflation coming, but I am wondering if maybe we are just too used to ridiculously low-interest rates. I mean, the ten-year T-Bill getting near 2% “feels” kind of high, doesn’t it?
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