Landlording & Rental Properties

Retirees: The Most Highly Profitable, Yet Grossly Underserved Niche in Real Estate

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
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Close up side on portrait of smiling aged male in glasses sitting with cup of coffee in cafe alone

In housing news, the repeated refrain is often Millennials, Millennials, Millennials.

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But baby boomers make up the second largest cohort of homebuyers at 31 percent, and that doesn’t even include the Silent Generation (even older homebuyers, who make up an additional 9 percent).

Is there an opportunity for real estate investors and landlords? A niche that other mom-and-pop investors are missing?

Corporate landlords and real estate developers haven’t overlooked it. The nursing home and senior living industry alone is estimated at $250-270 billion annually. So what’s the opportunity for targeting retirees in your real estate investing business?

Why Landlords & Investors Should Target Retirees

Where to begin? With money, of course.

Retirees tend to be wealthier than young adults, having had decades to accumulate assets and personal wealth. Consider their incredible equity: According to a Merrill Lynch study, Americans aged 65 and over had an average home equity of $200,000—equity that converts to cash before they move into your investment property.

Retirees also make perfect tenants. Take a moment to ponder how much less wear and tear they inflict on their homes. They’re less likely to have a zoo of pets, almost none of them have rambunctious children living with them, and they don’t have rowdy parties.

Then there’s the lower turnover rate. How often do retirees move? Quite rarely—the senior move rate is around 5 percent. Longer tenancies and lower turnovers mean lower costs and higher returns for landlords.

In other words, retirees are quiet, stable, low-impact, perfect tenants.

retirees

Related: How to Invest In Real Estate When Your Tenants Are Retired Seniors

Senior Moving Trends

According to the Merrill Lynch study, only 10 percent of baby boomers have any interest in ever moving to retirement or senior living centers.

Many want to stay in their current homes, but plenty others move to downsize, be closer to family, or even upsize. According to a Trulia study, 21 percent of baby boomers said they wanted to downsize, but 26 percent said they’d like to upsize. Even more telling is what people actually did once retiring: The Merrill Lynch study found that three in 10 retirees moved into a larger home post-retirement.

Likewise, they found that the number one reason that retirees moved was to be closer to their family.

These trends matter more than you might think. Nearly all of U.S. household growth between 2015-2025 is projected to be in the age 65+ category, according to Merrill Lynch.

Safety as a Priority

With so many retirees eschewing retirement communities and choosing to live in “normal” housing units, age-in-place safety becomes a priority. So, how can investors provide housing with appropriate safety measures for older adults?

Retirees are attracted to homes where they can live on a single story. That can mean apartments or ranchers, but don’t count out multi-story homes just yet. Additional stories can become guest levels, perfect for visiting family members. Properties do need a large bedroom, full bathroom, kitchen, and living space on the first level, though.

Bathroom grab bars are a simple and inexpensive feature to add in order to make any home more senior-friendly.

Consider adjustable light dimmer switches with high-wattage lights. Dimmer switches don’t cost much to install, but the ability to turn up the lights for reading or dim them for relaxing is a simple but effective amenity for older occupants.

Lastly, consider a security system. You could go old-school, with a subscription service (that the occupant pays for, not you), or you could spend a few hundred dollars on a smart home security system. Older adults are the least likely group to be victims of crime but are the most worried about crime. Assuage their crime fears with a security system—it won’t set you back by much and proves a persuasive selling point.

Comforts & Conveniences

Most older adults who move have already had their fill of high-maintenance homes. They don’t need acres and acres of lawn to mow or ancient homes needing constant repairs and upkeep.

What they do want are modern appliances and conveniences. And retirees are not opposed to “new” or “modern”—they want energy-efficient windows and refrigerators just like everyone else.

Landlords and real estate investors can even offer up-sells to incoming older renters and buyers to take on certain hassles for a fee. After all, seniors and retirees tend to have more money to spend but less interest in hauling furniture or setting up wifi routers.

Related: How to Kick Your Business Up A Notch by Tapping Into the Baby Boomer Niche

Provide extra value by partnering with local moving services, maid services, tech help services, and any other local service that you think older renters might want. When your retiree tenant/buyer signs the lease or sales contract, you can ask if they'd like help moving, mounting their TV, setting up internet (including offering information about common online scams), or adding a weekly maid service. You can then coordinate these services as value-add up-sells and boost your ROI in the process.

retired

Walkability & Going Carless

No one likes having that conversation about taking the keys away. But it is a simple fact of aging. As you grow older, your reaction time and eyesight deteriorate, making driving dangerous.

But older people still want to have a life, just like anyone else. They still need groceries, cultural amenities, entertainment, and evenings out. Fortunately, there are plenty of areas around the country that fit this bill.

The New York Times wrote an excellent piece about how urban and suburban-center communities will increasingly become prime retirement areas, surpassing the 20th century norm of isolated, gated retirement communities.

When I rented out my urban Fells Point townhouse to move to Abu Dhabi for a couple years, I was surprised to hear my 62-year-old mother inquire about the rent. A lifelong suburbanite, she started seeing the appeal of the neighborhood when my sister and I each moved into townhouses there and admired how easy it was to walk to, well, anything. Now all my stepfather hears about is moving downtown and selling one of their cars.

Retirees and older Americans want independence and a full quality of life even if they can’t drive or climb stairs anymore. They want modern technology to make their life simpler and safer, not more complicated. With so much attention paid to Millennials, there’s an opportunity for landlords and real estate investors to service a wealthier, quieter, more stable segment of the market. The price of entry? A little thoughtfulness and attention.

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Have you tried targeting retirees in your real estate investing business? How did it work out?

Let me know with a comment!

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Gary Breitbord Flipper/Rehabber from Holliston, MA
    Replied about 4 years ago
    I currently don’t own any rentals (still have nightmare$ from 1986 RE crash where I lost my shirt, shoes, socks, etc.), but can relate to your comment on seniors downsizing and first/single floor living. I know this is anecdotal, but my last two “flips” validate your premise. 1) Single family 1450 sqft ranch that I sold to a young couple with two young children. However, my backup was a retired couple looking to downsize to one floor living. They kept driving through the neighborhood and contacting me to see if the house had closed yet. 2) Single family 2100 sqft 2 story cape. We redesigned it so it had a 1st floor master suite and 1st floor laundry. Had many young families look at it, but this time we did sell it to a 50ish couple with an older son on his own and daughter in college who will be living in one of the second floor bedrooms. The first floor master and laundry were two key features that sealed the deal.
    G. Brian Davis from Baltimore, MD
    Replied about 4 years ago
    Thanks for sharing those stories, I find a great deal of truth in anecdotal evidence when it comes to real estate. I’ve seen a lot of empty-nesters in their 50s and 60s hunt for an easy, senior-friendly “last stop” house while they’re fully healthy, and basically say “I’m living here until I die.” And they go off and do some traveling, maybe spend winters elsewhere, but there’s something to be said for finding the perfect house to age in while you’re still fit and healthy.
    Eric Christians from Fargo, ND
    Replied about 4 years ago
    Intriguing……. I am going to do more research on this. The biggest obstacle I can see in my area is the cost of entry into this market. This demographic is looking for a nicer home than many other potential tenants. Are they willing to pay an increased rental rate that is in step with purchase prices? Glad you mentioned that Seniors are moving away from the exclusive gated communities. I would not have thought that but makes sense.
    Katie Rogers from Santa Barbara, California
    Replied about 4 years ago
    “This demographic is looking for a nicer home than many other potential tenants.” Many other potential tenants ardently wish their rent money would pay for a decent rental, but landlords often give them the bare minimum they can get away with. In my town, with its 0.5% vacancy rate, landlords charge and receive market rent for clearly substandard units. Seniors are not likely to be as desperate or tolerant of substandard conditions as “many other potential tenants.” They will expect to pay market rate for good quality (not necessarily high end, or “nicer,” whatever that means). Many are living on a fixed income. Do not let dollar signs glitter in your eyes.
    G. Brian Davis from Baltimore, MD
    Replied about 4 years ago
    Depends on the market, how closely the rents mirror the prices. But at the higher end of the market, you end up with lower vacancy rates and usually lower turnover rates, which help. Curious to hear what you end up finding, as you research your area more closely!
    Kevin House Investor from Victoria, British Columbia
    Replied about 4 years ago
    Hi Brian. Interesting article. Do you have references to additional material on this subject that I could check out?
    G. Brian Davis from Baltimore, MD
    Replied about 4 years ago
    Thanks Kevin. I don’t have any immediate extra references to send your way, but check out some of the linked materials that I referenced in the article, there’s a lot of information there to keep you busy for a while!
    Nathan G. Real Estate Broker from Cody, WY
    Replied over 3 years ago
    Good article and it’s definitely a good niche to get I to if your market supports it. I manage lit if rentals and am regularly approached by elderly people that want single-level units in great condition. However, I also see a lot of elderly on very small, fixed incomes that can barely afford the cheapest apartments. It’s a great motivation for me because I do not want to be 70, forced to rent a cheap apartment because I failed to plan!
    G. Brian Davis from Baltimore, MD
    Replied over 3 years ago
    I agree Nathan, great motivation to become financially independent as early as possible! “Getting older is not for sissies” as my mother always says, and doing it while broke is no fun at all.
    Bjorn Ahlblad Investor from Shelton, WA
    Replied over 1 year ago
    Great article and some really sound ideas. I have a 12 unit in a small city 17,000 and over half my tenants are retirees. It means I reject families, younger applicants, pets, anyone who I suspect will be too noisy.. Makes for a narrow tenant pool but still worth it. Oldsters have better values, will be more careful with property and respect their neighbors-at least that has been my experience. We screen carefully making sure they have enough income to pay the rent and projected increases. One thing you really need to do is find out about their support system, where and who their family members are and who we should call if and when help is needed. That is a really important aspect of renting to seniors. We have had tenants 'graduate' to senior living centers that's when you need a reliable family member to come in and take charge of the process.
    Jocelyn Williams from Akron, Ohio
    Replied over 1 year ago
    I own a twinplex and tenants are older. I find they can handle small dustups themselves, troubleshoot problems and good at communicating w/me on needed repairs in a timely manner this saves me money. At the same time rented to 2 (21 yr olds) and it didnt work out. Will adjust screening next time. Young were not ready to rent and communication not where I needed it. We all agreed to part ways. Which is best outcome. The older tenants have proven steady and took care of the home. Issues would be advertising for seniors and avoiding any fair housing issues.
    Davido Davido Rental Property Investor from Olympia, WA
    Replied over 1 year ago
    Thanks for the repost of this helpful article.
    Teresa Rice
    Replied 22 days ago
    I'm a baby boomer looking for a real estate investor for a niche senior housing arrangement - 5 bedroom, ensuite baths with sitting rooms in walk in closets. Shared living spaces, universal design. It has long been my dream to create a living space for myself and close friends and family to pool resources and live together. Would also need a carriage house type item for my adult son and his young family. This could be a model for a new generation of alternative senior living. Please advise.