The Misconception of Multi-Family Housing
What demographic group comes to mind when you read “transitioning from the trend of homeowners to renters?” Is your answer Millennials? Think again.
Focus your attention on the largest demographic for the past 50 years: yes, the Baby Boomers. For the past several years, the real estate industry has focused on Millennials as the primary renter demographic. We’ve heard countless stories of Millennials running from homeownership; because either they can’t afford a home, want to invest their money in unconventional ways, and want to be in the walkable city centers to name a few reasons. In actuality, Millennial home buyers are rising to the highest levels since 2014, causing the once booming rental market to feel the impact and investors to start driving the push toward Baby Boomer renters.
So, what does this mean to real estate investors?
The Baby Boomers have not been at the forefront of renter demographic in the past several years. As investors, this is an opportunity to think outside of the box. Multifamily units in suburban areas with strong amenities are going to be in high demand over the next 1-5 years with this new demographic craving the renter lifestyle. Their interests aren’t too far off from what the Millennials were looking for as renters either, which is a positive for property owners and investors.
In July 2016, Freddie Mac conducted their first ever 55+ survey of housing plans and perceptions (See: http://www.freddiemac.com/research/consumer-research/20160608_55ers_significant_impact_housing_market.html ). The results were startling:
- 71% of Baby Boomers (55+) plan to rent their next home, with more than half of the demographic group thinking it makes financial sense for people their age to be renters.
- Their top attractions include affordability and amenities; including living in a community where they are no longer responsible for maintenance and being walkable.
- They want to relocate in a different neighborhood in the same city.
Apply these results to any multifamily investment that you are considering. The 55 and over generation consists of 67 million people who is a drivable force in both the housing and rental markets. This is an entire generation that will be looking to make housing decisions as they enter into their retirement. Furthermore, consider the power of a good property manager fueling your investment property. There are plenty of ways a strong property management company can impact your investment positively, sometimes pushing a good investment to a great investment.