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Investment Strategies for High Inflation & Interest Rates in 2024

Updated: May 17


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The core Personal Consumption Expenditures (PCE) index, a tool the Federal Reserve uses to measure inflation, has recently increased by 3.7% in the first quarter. This rise is higher than expected and indicates that inflation is stronger than many economists would like. High inflation makes it difficult for the Federal Reserve to stabilize prices without slowing down the economy.


The response to this inflation data was immediate in financial markets. Bond yields increased significantly, and major stock indices like the S&P 500 and Nasdaq experienced declines. This reaction shows how sensitive markets are to changes in inflation and interest rates.


Investment Strategies in the Current Economy


Given the ongoing high inflation, investors should be cautious. This economic environment suggests interest rate cuts by the Federal Reserve might be delayed, which can affect borrowing costs, the flow of money, and the value of assets.


For those investing in real estate, particularly multifamily properties, current economic conditions present both risks and opportunities. While real estate can benefit from inflation as rents increase, potentially leading to higher property income, rising interest rates generally cause property values to decrease. This is due to the increase in capitalization (cap) rates, as higher interest rates typically lead to higher cap rates and consequently lower property values. Understanding this balance is crucial for real estate investors navigating the current economic climate.


While these factors might put pressure on your current portfolio, the great news is they also create outstanding opportunities. With cap rates high, multifamily assets are experiencing a percentage drop in prices not seen in the past decade. For investors, this is a prime time to buy low and reposition the asset to sell high later, after the market correction has stabilized and cap rates begin to decrease.

The Importance of Market and Sponsor Research


Before investing, it's crucial to understand the markets and the people you are investing with. Choose areas with growing populations, like those seeing people move from California to Texas, which suggest a high demand for housing. Also, ensure your investment sponsors are reliable and their investment plans match your own risk level.

 

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How to Evaluate Properties and Deals


When examining potential investments, pay close attention to the property's financial health and look out for any warning signs in the financial records from the past year. It's also important to understand the assumptions behind the property's financial projections, like how much rents are expected to grow. Question these assumptions to get a real sense of possible returns and risks.


Conclusion


The economic landscape set by the first quarter's figures creates a complicated environment for 2024. Real estate investors need to stay flexible, well-informed, and ready to adapt to changing economic conditions. Effective decision-making, fueled by comprehensive market research, sponsor evaluation, and property analysis, will help investors manage uncertainties and continue to grow their portfolios.


As always, Be Bold, Be Great, and Keep Pushing Forward!


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P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.

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Invest With Blue Lake Capital


If you are an accredited investor interested in learning more about passively investing in multifamily properties, click here to complete our investor form and schedule a call with our Investor Relations team.


About Ellie Perlman


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Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.


A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.


Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.


She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.


Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.


You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.


*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.

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