In housing news over the last year, the repeated refrain has been Millennials, Millennials, Millennials.
But Baby Boomers make up the second largest cohort of homebuyers at 31%, and that doesn’t even include the “Silent Generation” (even older homebuyers, who make up an additional 9%).
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?
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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 last year, 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%. Longer tenancies and lower turnovers mean lower costs and higher returns for landlords.
In other words, retirees are quiet, stable, low-impact, perfect tenants.
Senior Moving Trends
According to the Merrill Lynch study, only 10% 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% of baby boomers said they wanted to downsize, but 26% said they’d like to upsize. Even more telling is what people actually did once retiring: the Merrill Lynch study found that 3 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 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. 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.
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, or adding a weekly maid service. You can then coordinate these services as value-add up-sells and boost your ROI in the process.
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.
Have you tried targeting retirees in your real estate investing business? How did it work out?
Let me know with a comment!