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5 Reasons Passive Mortgage Investing Performs Well During Inflationary Periods

Updated: May 2


Anticipated short-term interest rate cuts have yet to happen this year due to higher than expected inflation, the Federal Reserve announced its May 1 meeting. Inflation remains at an elevated level despite having steadily dropped in the second half of 2023. From January to March 2024, the average was 3.2%, well above the Federal Reserve’s 2% target. In March 2024 versus March 2023, the personal consumer expenditures price index, the Fed’s preferred inflation measure, increased to 3.5%. We all know how inflation reduces the purchasing power of goods and services. How does inflation affect passive mortgage investments? There’s good news for capital investors. Real estate is long considered a hedge against inflation along with many investments tied to physical property. This bodes well for passive mortgage investing, which invests in private mortgage debt. During periods of inflation, there tends to be an increase in property values, home prices, mortgage rates, rents and home prices. As home values increase, borrowers may need to get larger loans to finance their acquisitions. Large loans combined with rising interest rates mean higher borrowing costs, resulting in an increase in returns for capital investors. Here are five reasons passive mortgage investments perform well during inflationary times:

  • Asset-Backed: Mortgage debt investments are backed by physical real estate, which retains its value during inflationary periods. Real estate often appreciates in value during inflation, providing a natural hedge against inflation.

  • Higher Interest Rates: As inflation rises, interest rates often follow suit. Higher rates can increase returns for capital investors when borrowers make monthly mortgage payments.

  • Stable Income Stream: Despite periods of high inflation, borrowers will continue to make monthly payments to avoid loan default. This steady income can help offset the effects of inflation for capital investors.

  • Diversification: Mortgages are issued across multiple property types and geographies, creating stability by balancing out risk and return. This can minimize the impact of inflation on an investor’s overall portfolio.

  • Outperforms Stock Market: Inflation generally has a detrimental effect on stocks due to the uncertainty caused by rising consumer prices. Passive mortgage investing offers higher, risk-adjusted returns compared to the stock market. Build Wealth and Take Back Your Time

With persistent inflation still around and mortgage rates at elevated levels, now’s a good time to consider adding passive mortgage investments to your portfolio. They are not normally offered to all investors so this is a great opportunity to participate in these high-quality investments. We are accepting new commitments for our mortgage fund, direct mortgage investments, and direct real estate ownership. Experience the power of passive mortgage investing by letting your money work for you. Build wealth while taking back your time to do the things you want on your terms. Please feel free to contact us for a confidential suitability call.

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