Property Investment During Inflation: Strategies to Protect Your Portfolio

Inflation is one word that can ruin any investor’s day. Unless, of course, your portfolio is totally inflation-proof. Then, inflation is just another word – and your portfolio thrives another day!

Protecting your portfolio against inflation is paramount. There are several key strategies which savvy investors can use to weather inflation.

In this post, we discuss property investment during inflation and what you can do to protect your portfolio:

Securing fixed-rate financing

The three things in life that are certain: death, taxes and inflation bringing increased borrowing costs. That’s why securing long-term, fixed-rate financing is highly effective for portfolio protection during inflation. By locking in a fixed interest rate for the loan term, investors shield themselves from increasing borrowing costs. As inflation escalates, the real value of mortgage payments diminishes, making this strategy especially beneficial for investors with long-term goals.

Adjust rent appropriately

When it comes to rental increases, this should be done thoughtfully and appropriately with value-adding services that make the increase justified.

While there are no laws prohibiting an investor from jacking up the rent by 50% to ‘counter inflation’, there are several reasons why this would be a bad idea. It’s ideal to foster good relationships with tenants, especially if they’ve been long-term and respectful ones. This reduces turnover and minimises risk of inoccupancy; just two weeks of a property being unoccupied could cost you the difference in rental increase, so you don’t always win with large rental increases.

Taking advantage of tax breaks

Weathering inflation is not just about the income a property generates: it’s equally about how much income is taken from you. That’s where property investors should talk to their tax adviser to maximise available tax deductions and credits. For example, depreciation can be a substantial deduction that reduces taxable income, offering a tax advantage that helps lessen the blow of inflation.

Looking at inflation-proofing your property portfolio? Get in touch with the team at Patrick Leo. Patrick Leo is Australia’s leading team of property consultants. We help investors achieve their goals by coming up with winning strategies in property investment, and can help you inflation-proof your portfolio. Get in touch with Patrick Leo and continue your journey to abundant wealth today.