People often look to the millennial generation for an idea of where markets will trend. And with good reason — this is the largest generation since the baby boomers, and is expected to overtake the number of baby boomers in 2019 when trends hit 73 million millennials and 72 million boomers.
When it comes to buying a home, millennials are iffy. In some cases, it isn’t that they don’t want to own a home, but it may seem out of reach. Only 39 percent of millennials have the standard 20 percent down payment thanks to a job market that only recently started boasting real wage growth. This limits their home buying ability.
Sixty-two percent of millennials state they rent while they wait to buy a home. This is driving up rental costs in many big cities and creating an inventory shortage.
At the same time, the number of baby boomers renting has increased by 84 percent in the last 10 years. For real estate investors, these combined trends should look appealing. Not only is the field of potential renters expanding, but demand for high-quality rentals drives prices, and profits, up.
Plus, you may not even have to put in much legwork to appeal to these different demographics. As it turns out, the old guard have more in common with those pesky young’uns than you may think.
Baby Boomers and Millennials Are Similar
Did you know that older renters (those over 55) have increased at nearly ten times the rate of young adult renters (under 35)?
Renter demographics are changing, and while millennials are a massive (and growing) generation, many baby boomers are looking to downsize, urbanize, and say adios to the responsibilities of home ownership. Luckily for landlords, baby boomers and millennials are similar in their renting habits, which means property managers can reach both target audiences with similar marketing.
Millennials look for rentals with amenities and convenience. They want to be close to transportation, have restaurants and entertainment nearby and be part of a rental community where they can visit with their neighbors.
Many baby boomers want the same thing. Instead of flocking to separate accommodations, boomers and millennials can and should find common ground and make connections. Landlords and investors can emphasize these elements in listings knowing that they can potentially attract tenants at both ends of the age spectrum.
Mobility Is Key
Millennials often choose to forgo expenses like purchasing a vehicle so they can enjoy a variety of activities, travel and have more income to play with. Baby boomers similarly enjoy living in the midst of clustered amenities, and selling a family home frees up equity built over many years. If a city can sustain it, these groups may both be substituting public transportation for the old-fashioned “drive everywhere” mentality.
Older adults are also working longer than their parents did in order to make ends meet. This means they still need reliable transportation to and from work, even if only to a part-time job. After all, the number of employed seniors in the workforce recently hit a 55-year peak.
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When renters look for a new place to rent, they pay careful attention to what transportation options are nearby. Property managers would be wise to research the options and make those clear to potential renters. Is the property near a bus line? Is it a short bike ride to a local shopping center? Perhaps there are ride sharing programs nearby.
Still, Americans are hardly likely to shift completely away from our car-heavy society. On-street only parking isn’t a deal-breaker, but apartment managers still need to be aware of the need for parking and ready to point out viable options in the area, such as inexpensive parking lots or where the tenant can easily park when arriving home.
Living in the Middle of the Action
While baby boomers are working longer, they are also living longer. This means they are more active than previous generations at their age. They want to get out and enjoy life, create new memories! Life is about building experiences; boomers don’t want to be stuck in a remote, isolated location without access to fun amenities to try out.
Millennials have a similar outlook on life. They want to build memories and experience all life has to offer. They want to live in the middle of the action and be within walking distance of stores, restaurants and event venues – or at least a very short drive away.
Consumers expect everything they need to be within a 10-minute “bubble” around where they live. If you’re looking for a rental property to invest in, pay attention to what amenities are being added in the area. Get out and walk the neighborhood within that 10-minute bubble and see what is available. This knowledge also helps landlords and property managers as they advertise a vacant rental and explain the benefits.
Enjoying a Sense of Community
In ages past, families lived in multi-generational homes and enjoyed plenty of social opportunities. Today, families may live halfway across the country or even on the other side of the globe. Multi-generational homes still happen of course, but families have increasingly found new ways to communicate over long distances with technology. This means apartment communities have sought to create new places where residents can socialize with one another.
It isn’t uncommon to go into the common area of an apartment building and see older and younger generations chatting. Despite what you might read online, inter-generational feuds aren’t a given — most millennials know we have a lot to learn from the older generations. At a minimum, both generations can enjoy getting out and meeting new people of all different ages.
Many modern apartments offer classes, such as fitness classes, cooking classes, or other community events. This type of social gathering is particularly attractive to baby boomers as they leave the suburbs for city living. Millennials enjoy meeting new people and making networking connections that may pay off socially or professionally. Older professionals may have connections and knowledge that the younger generation doesn’t have, while younger generations have fresh ideas and familiarity with technology that’s helpful to baby boomers.
Mixed-use projects are on the rise, which includes urbanism, transit development and chances to socialize with others. This might look like a building with a dog park, rooftop gardens, a swimming pool and indoor spaces, such as a coffee bar and seating, community kitchens and even a theater complex.
Imagine a mini-city within a single building or block and you’ll have a vision of a mixed-use project. You don’t need to undertake such a massive project to understand the benefits of value of incorporating some of these ideas in small ways!
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Both millennials and baby boomers look to renting versus buying because of the flexibility involved. The homeownership rate fell from 69 percent in 2004 to 63.7 percent in 2015, and the trend continues. There are many reasons this rate keeps falling. Younger people often have less income to save the required down payments or take on the additional costs of maintaining a home.
However, a big reason for the shift is that renting provides flexibility that buying doesn’t. Younger people may want to keep their options open in case an amazing job opportunity opens up, or they need to move to another city. Baby boomers like the flexibility of being able to move to any area they’d like, including regions with milder winters. Not being tied to a home and perhaps unable to sell it is an attractive option for people in the twenty-first century.
If a neighborhood changes for the worse, renters have the option to simply move to another location when their lease agreement is up – typically within a 12 month lease term.
Still, leasing is not without its drawbacks. Real estate owners as a group have a far larger net worth than renters, as real estate has been demonstrated to be the best investment of the last 145 years. Of course, no one says you can’t be both a renter and a landlord, leasing your primary residence while owning other rental properties!
The Rental Mindset
The current economy seems to be set toward renting rather than buying. After all, you can now pick and choose digital entertainment streaming services, lease a car and borrow audiobooks from digital libraries. Many people are interested in an à la carte lifestyle. For the young and the old, it’s attractive to avoid being tied down when you want an upgrade, or to have the ability to pick up and move across the country.
Research supports the idea that millennials and baby boomers may not be as distinct in their housing preferences as you may think. Moving forward, real estate investors should consider what these groups are looking for and apply this knowledge in their efforts to attract high-quality tenants to profitable apartment buildings.
What have your experiences been with evolving renter demographics? Do you generally rent to one generation, or multiple generations? Share your thoughts below!