How do you protect yourself from Inflation?

[Luis Rivera]

The reason this question interests me a lot is because personally inflation affects me very little, but what about you successful investors that have 100k  and more? Losing 2% to Inflation is a very big deal but then again you need cash in order to pay employees or repairmen.

What strategy have you put in place in order to protect your money from inflation while still being able to keep your real estate running? 

Thank you for all the answers, have a nice day yall.

[Ben Zimmerman]

Inflation only hurts those with significant amounts of cash, or cash equivalents like most bonds etc.  Those who own commodities of some sort are not hurt by inflation as the price of their commodity generally increases with the rate of inflation.

With real estate since most people are leveraged by obtaining loans, inflation tends to help us significantly.  

Eg:  If you have 20k in cash, then 3% inflation means you essentially lost $600 worth of purchasing power.

If instead you used that 20k to purchase a 100k home, then a 3% inflation rate will generally mean your home is now worth 103k.  So you gained 3k in equity.  This is a 15% return on your initial investment of 20k.  

As for cash that we keep set aside to run our business, up until recently you could easily get 2% return in a high yield savings account which basically at least kept pace with inflation.  I don't typically keep a ton of money in a savings account, only enough to cover most situations.  

Instead of keeping multiple tens of thousands in cash in a savings account, I keep much less in savings and instead have a more robust stock portfolio that I use as a sort of extended reserves that I can liquidate in case of emergency.  The key is to have enough in this extended reserve such that even if a significant market drop did occur, this fund would still be large enough to cover your expenses and get you through until the economy recovers.  While it's possible that you may at some point be forced to dip into this reserves while the market is down, statistically speaking as long as you stay consistent then you will come out way ahead.

I also have a guaranteed military job, so my paycheck is always coming in which allows me to take more risks than others would potentially feel comfortable with.