Millennial Property Investors + Real Estate Crowdfunding
The emergence of online real estate crowdfunding platforms has given rise to a whole new arena of property investors - namely, Millennials. These platforms, including my company Durise, offer this tech-reliant generation easy access to new investment opportunities they might not have even realized existed otherwise. On top of that, the low-barrier to entry that’s at the heart of real estate crowdfunding means they can get in on the investing game much sooner than past generations.
The New York Times first reported on the growth of millennial real estate investors in late 2015, and it’s safe to say that the boom has continued to steadily increase since then. “Millennials are interested in getting involved in investments and building up their portfolios, but they are turning towards alternative forms of investment, rather than traditional, as other generations have consistently done. Investment in the real estate market is one of these alternative investments that is gaining steam with this age group.”
Over the past several years, it has been well documented that Millennials are much more likely to rent homes than they are to purchase. In fact, only 24-36% of Millennials in the U.S. are homeowners, compared to 64% for the general population. Yet an interesting trend that is emerging, as first reported in the New York Times article mentioned above, is that Millennials are heavily investing in single-family homes which they are then renting for profit.
So, why is real investing emerging as a Millennial trend, and how is real estate crowdfunding bolstering this phenomenon? Let’s explore.
Early Shares lists 3 primary reasons why the millennial generation is drawn to real estate investing. These are:
1. The benefits of ownership without the drawbacks of commitment
“...Millennials have a known affinity for bouncing from job to job, city to city, apartment to apartment, and traditional home ownership doesn’t align with their priorities. Investing, however, does. Purchasing rental homes or making passive, small-dollar investments through real estate crowdfunding are ways for Millennials to win the benefits of buying (and the additional incentive of consistent cash flow and income) without committing to settle down in a single location.”
2. They lived through the Recession (and know who the winners were)
“Having lived through the Great Recession at a pivotal point in their lives, [Millennials are] distrustful of financial institutions and interested in forging their own, less traditional paths. But they’re also very smart, and know they need to protect themselves from the kind of financial trouble that hurt their parents’ retirement plans and long-term stability. An interest in owning rental real estate is an obvious extension of that: They know who benefits from the rent checks they send in every month, and they want to strike out to earn some of that action themselves.”
3. They know what “diversification” is – and understand its value
“Millennials can recognize the lessons we all hard to learn the hard way: Don’t rely on the value of your home to go up indefinitely. Don’t over-extend yourself on real estate you can’t afford. Don’t rely on one asset or investment avenue to support your financial future.”
Point #3 is especially worth paying attention to as it points to the very real benefits they are finding in real estate crowdfunding as the go-to platform for building their investment portfolios.
A recent CrowdfundInsider article reports that Millennials feel “a trip to the bank is a waste of time as they would prefer to sit at home or a local Starbucks and search for investment opportunities on their smartphone, laptop or tablet. Additionally, Millennials are turning to their online networks when making purchasing decisions.” They are the first generation that has been “plugged-in” since birth, so it only makes sense that they’d choose to turn to online avenues for purchasing and investing. Real estate crowdfunding options meet them right where they are - online and in their social networks.
Beyond the ease of investment portfolio diversification offered through Real Estate Crowdfunding, it’s also a highly sought after form of investing because it doesn’t require large amounts of capital up front. With the average entry point to a real estate crowdfunding investment opportunity hovering around $1,000 to $5,000, the opportunity is open to virtually everyone. And now that the new JOBS Act legislations have been passed, they no longer have to worry about the same barriers faced by previous generations of wanna-be investors.
Another point that underscores why Millennials view real estate crowdfunding so favorably is that they are a global generation. From frequent world travels, with rates higher than any previous generation, to the global community they interact with in their social networks every day, this generation wants to invest in opportunities beyond those in their own backyards. And real estate crowdfunding platforms give them the means to do that effortlessly. They can invest in properties across the Nation or across the World.
A new era of property investors is emerging through the Millennial generation. Their needs for low investment thresholds, diversification, globalization, and tech-friendly opportunities are being met, and they are jumping on the bandwagon in droves. And while they do, today’s real estate crowdfunding platforms are at the forefront of that journey.
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