Runaway inflation & RE investing

[Kim Horn]

Since this is being brought up in the news, I have to wonder how runaway AKA hyperinflation might influence real estate investing? In particular how it might influence a lease with an option to buy. My husband is uncomfortable with using a lease-option in the event that the hyperinflation rears its head. Is he right to be concerned? How will it affect sellers vs buyers? The good, the bad, and the ugly! Any thoughts?

[Edward Liu]

You should not worry about hyperinflation, chance of it occur in the US is near zero.  Hyperinflation usually occur in a country that had some type of revolution, for example, Russia after Communist revolution is 1917, Germany after end of World War I surrender, France after the French Revolution, Austria during World War I, Philippines after Japan invaded it during World War II, etc.  Do you see the pattern?  How likely do you see US changes to dictatorship from democracy, or a communist country, or involved in the next world war?  

Even hyperinflation does occur, you want to hold real assets, such as gold, land, and commodities.  Paper money and stocks are going to be worth less and less.  So technically you should hope person walk away from the option to buy.  If you are really concerned, you can always put a clause in your lease with option to buy that if inflation hit certain number, this agreement is invalid.  Most tenants won't understand the reason for clause anyway.