The number of Millennials (those born after 1980) investing in real estate has increased. Some of us are left wondering why and how this is happening. Many of us are also looking into the channels that allow Millennials to invest and the new opportunities this creates for all real estate players.
Why Are Millennials Investing in Rental Properties?
Perhaps buying real estate in their 20s made sense for Baby Boomers (those born between 1946 and 1964) because of the average age of marriage, a stable job market, and, in general, better financial situations than people their age today.
When people in their twenties are asked why they should buy, they usually respond, “Why not just rent?” However, many Millennials are no longer interested in renting and have learned how to invest in real estate and reap the rewards.
Millennials have one advantage over their parents and grandparents, despite having more debt, higher unemployment, and less wealth. They witnessed the recent recession and its consequences, such as delayed retirement.
Their interest in real estate investing stems from a lack of wealth at a young age and the possibility of future financial instability. Millennials recognize that investing provides them with additional monthly income and a hedge against inflation.
Millennials are better off investing in real estate rather than buying a home. It removes the need to commit to a home if they choose to move around for work.
Since many people do not settle down in a home until later in life, they can take advantage of the flexibility. It also allows you to start making money and paying off debts, as finding a job nowadays requires more education, time, and money.
Fortunately for Millennials, they have not had to deal with financial difficulties such as the loss of pensions or stock market investments, which gives them an advantage in investing. But, once again, how are they investing if they don’t have any?
How Are They Doing It?
This generation approaches investing differently. Some people can find well-paying jobs right after graduation and save for a down payment in a short period.
On the other hand, some face difficulties due to low credit scores and sellers who are unwilling to accept FHA loans. The beauty of this generation’s involvement in this industry is the emergence of new options for everyone to consider.
One of these options is investing in REITs, which are companies that invest in income properties and have stock exchange shares that people can buy. This allows them to participate in various investments and is a feasible way to get started.
But Airbnb has also created a channel for anyone looking to supplement their income, not just Millennials. Those who purchase a home can use Airbnb to build equity and pay off their mortgage by renting out a part or the whole apartment.
This gives anyone more options for turning their home into an income property and has grown in popularity to the point where some people are investing in real estate full-time through Airbnb.
Some Recommendations for Millennial Investors
Having good credit lowers interest rates and gives you more bargaining power. Finally, there are many resources available today to assist people in understanding investing and getting started.
It’s become easier to network, find properties, and understand investment potential.
What Does This Mean for the Industry?
The real estate industry has been disrupted by millennials, who have created fierce demand and competition for rental properties while also reducing the number of homebuyers.
On the other hand, sellers have a new demographic to appeal to in the form of these Millennial investors. This creates a whole new market for agents, realtors, and brokers to leverage on.
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