{"id":105319,"date":"2019-01-22T14:30:58","date_gmt":"2019-01-22T21:30:58","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=105319"},"modified":"2021-03-16T14:51:56","modified_gmt":"2021-03-16T20:51:56","slug":"next-big-disruption-in-real-estate-investing-millennials","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/next-big-disruption-in-real-estate-investing-millennials","title":{"rendered":"Are You Ready for the Next Big Disruption in Real Estate Investing?"},"content":{"rendered":"

When you hear the word \u201cmillennial,\u201d what\u2019s the first thought that pops into your head? <\/span><\/p>\n

I\u2019d wager a guess it\u2019s not<\/span> \u201csavvy real estate investor.\u201d <\/span><\/p>\n

Millennials have earned something of a bad rap<\/a> when it comes to money\u2014and pretty much everything else, for that matter.<\/span><\/p>\n

But as a millennial <\/span>and <\/span><\/i>a real estate investor, I\u2019ve often found myself wondering, “Am I an exception to the rule, or is everyone seriously misguided about my generation\u2019s priorities?”<\/span><\/p>\n

My company, Clever Real Estate, recently <\/span>conducted a survey<\/span><\/a> of 1,000 Americans who were planning to buy a home in the next year. Approximately 52 percent of respondents were classified as millennials (between the ages of 18 and 34).<\/span><\/p>\n

What we learned was surprising\u2014and ran contrary to prevailing narratives about millennials within the real estate community.<\/span><\/p>\n

Our team compiled a number of key insights from our report, along with emerging data from leading industry analysts, to paint a comprehensive picture of the blossoming millennial real estate investor\u2014aka the industry\u2019s next major disruption.<\/span><\/p>\n

Here\u2019s what you need to know.<\/span><\/p>\n

Related:<\/strong>\u00a05 Ways the Real Estate Industry Will Completely Transform Over the Next Decade<\/a><\/em><\/p>\n

\"millennials,<\/p>\n

The Next Wave of Investors Has Arrived<\/h2>\n

Millennials are about to become America\u2019s <\/span>largest living generation<\/span><\/a>. And did you know\u00a0my peers and I are already the largest generation in the <\/span>U.S. workforce<\/span><\/a>?We\u2019re <\/span>earning more<\/span><\/a> than previous generations did at our age and, despite what you may have heard, we might actually be better at saving, too.<\/span><\/p>\n

In fact, a 2018 Bank of America study found that <\/span>approximately 46\u00a0percent<\/span><\/a>\u00a0of millennials have managed to accumulate more than $15,000 in savings, while 16 percent have saved over $100,000. In other words, we\u2019re a whole lot more adept at managing our money (and debt) than some would have you believe.<\/span><\/p>\n

Related:\u00a0<\/strong><\/em>Millennials Are Poised to Be the Wealthiest Generation Yet: Here\u2019s Why<\/em><\/a><\/p>\n

As the job market continues to improve, millennials\u2019 buying power is increasing in kind, and we\u2019re looking for smart ways to invest our newfound wealth.<\/span><\/p>\n

Americans under the age of 37 already represent the <\/span>largest share<\/span><\/a> of home buyers, at 36 percent. While most of those buyers are looking for residential properties, we all know that real estate investing<\/a> is only a small step from there\u2014a step that many millennials, specifically, seem very interested in taking.<\/span><\/p>\n

Clever\u2019s study found that millennials are a full 52 percent more likely to invest in multifamily properties<\/a> than Generation Xers or Baby Boomers. <\/span><\/p>\n

In addition, 9 percent of millennials (also called Gen Y) respondents said they were buying properties specifically to generate passive income\u2014more than Generation X (6 percent) or Baby Boomers (5 percent).<\/span><\/p>\n

Why Real Estate?<\/h2>\n

Millennials came of age during the 2008 housing crash. We began entering the workforce in the middle of the Great Recession. <\/span><\/p>\n

So, it\u2019s no surprise that a lot of us are suspicious about the stock market, financial institutions, and the economy in general. We prioritize financial stability, autonomy, and ultimately, independence.<\/span><\/p>\n

Despite the stock market\u2019s recovery (and then some) over the past decade, Gen Y is increasingly giving it the <\/span>cold shoulder<\/span><\/a> and gravitating instead toward more tangible asset classes.<\/span>\u00a0And what\u2019s more tangible than physical property?<\/span><\/p>\n

In Clever\u2019s study, 43 percent of respondents ages 34 and under said they were interested in purchasing property because they felt it was a good investment. But it\u2019s important to point out that we\u2019re not just following our collective gut here. We\u2019re doing our homework. <\/span><\/p>\n

Over the past two decades, the real estate market has outperformed the stock market by a factor of nearly 2 to 1. (Since 2000, the S&P 500 yielded an <\/span>average 5.43\u00a0percent<\/span>\u00a0annual return<\/span>\u00a0versus the real <\/span>estate market\u2019s 10.71 percent<\/span><\/a>.) <\/span><\/p>\n

What’s more, a<\/span>\u00a0recent survey conducted by RealtyShares found that <\/span>more millennials were aware<\/span><\/a> of this fact than any other generation polled.<\/span><\/p>\n

Part of this awareness may actually come from our typically maligned internet obsession. Many online financial experts popular among Gen Y are increasingly recommending investing in real estate over the stock market<\/a>. So much for the theory that millennials have no attention span!<\/span><\/p>\n

\"real<\/p>\n

Barriers to Entry<\/h2>\n

Millennials may be eager to dive into the real estate investment market, but we have some unique challenges we\u2019ll need to overcome first.<\/span><\/p>\n

According to recent data released by credit rating agency Experian, millennials have an <\/span>average credit score of 652<\/span><\/a>. These lower credit scores\u00a0can significantly hike up our mortgage rates or, in some cases, prevent us from getting loans<\/a> altogether.<\/span><\/p>\n

Related:<\/em>\u00a0<\/strong>5 Tried-And-True Ways to Improve Your Credit Score<\/em><\/a><\/p>\n

This is likely due to our generation\u2019s massive collective debt load. The average millennial carries a burden of <\/span>approximately $36,000<\/span><\/a>, mostly from student loans<\/a> and credit card bills. <\/span><\/p>\n

Of course, this isn\u2019t just making it difficult for us to get loans\u2014it\u2019s making it difficult for us to save, as well. In fact, nearly 39 percent of the millennials polled in our study listed down payments<\/a> as the number one barrier preventing them from buying property.<\/span><\/p>\n

Thinking Outside the Box<\/h2>\n

That said, Gen Y is nothing if not scrappy, and many of us are finding creative financing workarounds<\/a> through technology and other emerging investment tactics.<\/span><\/p>\n

For example, as the popularity of vacation rental sites like Airbnb, HomeAway, and VRBO continues to grow, expect millennials to lead the pack in terms of adoption. Just like we would with a multifamily residence, we\u2019re using these emerging opportunities for supplemental income to pay off mortgages and taxes, build equity, and invest in new properties. <\/span><\/p>\n

While this practice still hasn\u2019t been fully accepted by the REI community at large, it should be. The official numbers for last year haven\u2019t come out yet, but <\/span>industry analysts projected<\/span><\/a> that the private accommodation market would top $36 billion in 2018.<\/span><\/p>\n

Plus, it\u2019s allowing many millennials to break into the REI industry when they otherwise wouldn\u2019t have considered it as an option (i.e., instead of having to buy an additional investment property, single-family homeowners can now simply rent out individual rooms to generate supplemental income).<\/span><\/p>\n

Technology Will Level the Playing Field<\/h2>\n

Millennials have hurdles to overcome in entering the real estate market, but we\u2019re also going to have the upper hand in an increasingly digitized real estate landscape.<\/span><\/p>\n

As the first true \u201cdigital natives,\u201d millennial investors have all of the skills and resources to not only identify emerging markets and investment opportunities, but also to pounce on them quickly. <\/span><\/p>\n

Our study found that, more than any other generation, millennials are utilizing smartphone-centric platforms like Zillow and Trulia to obtain up-to-the-minute data and make informed decisions. <\/span><\/p>\n

Apps like these allow young investors to search for properties and handle transactions from hundreds\u2014or even thousands\u2014of miles away, if they so choose. In other words, millennial habits and preferences are creating an increasingly delocalized real estate landscape, where investors can tap into hot markets all across the country\u2014not just those in their immediate vicinity. <\/span><\/p>\n

Millennials are just now entering into our peak spending years. At the same time, the real estate industry is quickly moving in a direction that plays to the strengths of our generation. <\/span><\/p>\n

For those reasons, we\u2019re perfectly poised to be the next major force in real estate investment\u2014and we\u2019re going to take the reins sooner than you think.<\/span><\/p>\n

\"\"<\/a><\/p>\n

How do you think millennials will fare in the market?\u00a0<\/em><\/p>\n

I’d love to know your thoughts. Comment below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Millennials are not only about to become America\u2019s largest living generation\u2014they’re already the largest generation in the U.S. workforce. What does this mean for the future of real estate investing?<\/p>\n","protected":false},"author":218674,"featured_media":105321,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5528],"tags":[],"class_list":["post-105319","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-news"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/105319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/218674"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=105319"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/105319\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/105321"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=105319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=105319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=105319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}