How Generation X-ers Should Prepare for a Future of Real Estate Investing
Generation X — the Baby Boomers’ babies. Eighty-three million of you make up this demographic in America, a group which society has dismissed as directionless, disappointed in their lives, and generally let down by a world that promised such a shiny future. If you were born between 1965 and 1980 (I suppose I’ll permit 1964 and 1981 babies too), then you are part of Generation X.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
I don’t want to go into the political, social, and technological landscape that formed the backdrop to your childhood — you lived through it, after all. You don’t need me to tell you about Watergate or Elvis Presley or the marvel of desktop computers. But what you do need me to tell you is that it’s not too late. Don’t label yourself as a Generation X-er who failed to live up to your ambitious, over-achieving parents and are about to be outshone by your own children. It’s time for you to take control of your life and start investing. In real estate.
Where is Generation X in the real estate market now?
When it comes to Generation X, it’s fair to say the real estate market hasn’t been kind. Because they reached their 30s and 40s at the exact time of the housing crash in 2009, Generation X-ers represented many new home owners who suffered greatly from the market collapse. Many lost their homes and were forced into rented accommodation, their credit shot to pieces with little hope of securing a mortgage again any time soon. Still others had taken greater steps into the real estate market and become landlords or set up their own real estate businesses. As those oh-so-tempting adjustable mortgage rates veered in the wrong direction, people who had been doing well suddenly found their world crashing around them.
With all of that being said, a significant portion of Generation X-ers do own their homes — 63.5% of them, in fact, according to the National Association of Homebuilders’ Eye on Housing in April 2016. You see, it’s possible to protect yourself from market dips and financial difficulties. It’s all about when and where you invest. So whilst some people suffered horribly in 2009, a greater proportion sailed the rough seas, have come out the other side, and are looking to invest their money in the newly stabilized market.
Unlike their parents, Generation X-ers don’t tend to trade up into larger houses as their affluence levels increase, but rather buy with the view of staying in one place for most of their adult life. They also seem to prefer purchasing new-build properties — statistically, at least. The combination of these two behaviours has left only a small sliver of the market open to Millennials entering the market and has also pushed the price of retirement cottages up for the Baby Boomers. But the important thing is Generation X is still purchasing homes, and their ownership statistics are steadily rising after the disaster of 2009. One thing is clear: Generation X does not want to be renting.
As the housing market stabilizes, Generation X-ers are steadily moving into stronger financial positions from which some may now begin to consider investing in real estate. If you weathered your way through the housing crisis with your mortgage payments up-to-date and some solid credit in your pocket, perhaps it’s finally time to take the plunge and enter the real estate game. And even if you didn’t — if you never managed to get a foot on that first rung or if you made a few bad choices — don’t let the past prevent you from focusing on your future.
Where should Generation-X invest?
There are two main ways to invest your money for everyone on the planet: real estate or more traditional options, such as the stock market or bonds. Personally, I chose the former. And here’s why:
Real estate offers the opportunity to make some real money, to gain control over your own life, your work, and your dreams. As for where in the market to invest, I think there are three areas Generation X can consider: buy to sell, residential rentals, and commercial property.
If you want to buy to sell, invest in what you know. Research shows Generation-X are looking for different things in their homes than Millennials or Baby Boomers. So why not invest in properties that would appeal to your generation? That way, you’ll know how to market them, how to advertize to them, and, most importantly, how to sell to them. For example, rather than an extra bedroom, a Generation X-er might prefer a home office. Their lifestyles rarely call for a formal dining or living area, making these rooms redundant. The research also shows they look for lots of storage. Closet space and kitchen cupboards appear to be high on a Generation Xer’s shopping list. Increasingly, they’re also looking for energy efficient properties, possibly with solar designs. And a yard — Generations X-ers love yards. So if this sounds like the sort of home that might appeal to you, perhaps consider selling these styles of properties to others.
Alternatively, the rental market is booming right now, so if you don’t want to buy to sell, why not make money off the Millennials’ choice to stay renting? (I say “choice,” but the first-time buyer’s market is not exactly welcoming for many young people.) Becoming a landlord, however, is not for everyone, and you need to know what you’re getting yourself into before you commit. It’s much more work than just handing over the keys and collecting wads of cash at monthly intervals. Tenants expect their landlords to be on call 24/7 and turn up to fix problems at a moment’s notice. Of course, you can hire a property manager or better yet, buy through a turnkey company to take over all of the hassles for you.
Finally, you can choose to invest in commercial real estate. With a greater chance of finding long-term tenants and with a lower liquidity rate, this is often the most common path for Generation X-ers who are thinking about their future. A steady, reliable, relatively stress-free income from a commercial renter can help bolster your retirement nest egg. OK, you’re probably not thinking about retirement just yet, but you will be in the not-so-distant future, and this style of real estate investment is probably the soundest.
Consider this when entering the housing market as an investor.
Here are some stereotypes about Generation X. You were the generation of instant gratification. You were probably brought up in a comparatively wealthy family. Few of you have ever been to war. You may be divorced (rates skyrocketed with Generation-X). What have these points got to do with investing in real estate? Well, I’ll tell you. This line of business is hard work and isn’t going to provide you with the windfall you’re imagining straight away. If you’re not up for the exhausting task, if you’re not in this for the long haul, don’t bother even trying. If you’re willing to work, go for it!
I’m not going to deny that the world of real estate is scary, unpredictable, and can be brutal if you make bad decisions. But it’s so worth it if you do it right. Invest but be prepared for work and be careful. At least, don’t take too many risks at first. OK, perhaps you’ll get lucky, and the run-down property at the edge of the up-and-coming area turns into a gold mine. But perhaps it turns into a money pit with endless structural problems.
Until you have experience and a financial cushion of sorts, I’d recommend being sensible and cautious. But don’t be scared off — becoming a real estate investor was the best decision of my life, and I strongly recommend it to anyone. It’s never too late to start. Remember, 36.5% of Generation X are yet to buy their homes. So if you know what your generation wants, why not find it for them? And if Millennials have chosen to rent, why not choose to be a landlord? If you’re not happy with your company pension, why not supplement it? Generation X: Take your unique position in the world and use it to your advantage.
Are you a Generation X-er? Do you invest in real estate? Why or why not?
Let me know your stories with a comment!