More than 25% of the US population comprises of millennials, and their numbers have swelled over to 76 million. Not only this, but they are also the largest and the most influential generation in history.
They are also known as the “me” generation; however, wrongly labeled as lethargic, moody, and indecisive. Irrespective of their work pattern, millennials earn 20% less than what their parents and grandparents earned at this age.
Despite low income, they have the most substantial buying power and, therefore, constantly bombarded with ads and marketing stuff. Although millennials tend to spend a lot of money — they are more willing to rent products and services instead of buying. This is why millennials tend to own lesser property than their previous generations.
Although buying a home seems lucrative. You get to build equity, enjoy the tax reduction, and accomplish a major milestone. But even then, millennials are more likely to rent the property — according to a 2017 Pew Research.
But do you know, they pay a significantly higher rent rate than the cohorts in the previous generation? There are three significant reasons for it:
- The Lingering Effects of 2008-2009 Recession
- Delayed Settlement Plans
- The Division of Housing Market
Why Long-Term Rentals is the Best Bet?
This futuristic generation has entered the worst real estate market for the past 50 years. But many real estate marketers are persuading millennials to make the big leap. However, the tradeoff is not easy for many Americans as it could easily turn into a financial nightmare, if not planned properly.
Here are a few reasons why millennials should rely on long-term rental plans rather than make the ultimate purchase.
Millennials are Late Settlers
Source:: Pew Research Center
A 2013 Gallup study points out that millennials tend to get married and settle down late. Their family goals are quite delayed as they take the time to discover what they want from life.
Making lifelong commitments to a particular lifestyle creates less pressure for them, thus reducing the need for buying a home. They have an unstable lifestyle and ambiguous career paths, which asks for constant traveling and relocation. If they are not bound to spend 10-20 years at the same place, buying a home is not a great idea.
The cost of a house is 13 times more than that of typical American earnings. The most defining factor is that the homes available for sale are well below the numbers required to maintain the balance in the market. Thus, it is not safe to enter the bidding war for buying the property.
Although rentals are high but chasing a continuous expense could be daunting. Millennials who are mulling over the renting vs. buying debate should also consider the long-term market dynamics. The home prices may spike suddenly due to rising inflation or a collapse of the market, in the wake of COVID-19.
To Avoid Depreciation
This could not be the right time to make the purchase. Although the down payment cost is all-time low with minimum mortgage rate still, it’s risky. There is no guarantee to protect your primary asset from any depreciation and erosion of market value. And you may need to sell off the property soon without receiving any financial gains.
The real estate debacle and current financial crisis may lead to higher interest rates, too early to predict the market reaction. Banks repossess most of the houses due to the remaining mortgage payments of many homeowners. In the coming years, these homes will be entering the real estate market, especially in the most expensive urban markets.
Maintain their Savings
Millennials are the generation who rely on savings. Having low-income rates, they are focused on establishing a financial safety net. 1 in 6 have $100,000 in their saving accounts.
But there are a high number of late boomers whose retirement plans are far less to generate adequate passive income. Mostly, they own a home —which is their most significant asset for those years. Since their retirement is going to approach in the next 5-10 years, there is a high probability that home sellers will flood the real market.
In such testing times, it is not wise to invest your savings or a specific portion of your earning in buying a home.
Steer Clear of Taxes
Renting is much more convenient as it allows you to avoid the paperwork. Buying a house isn’t limited to mortgages as you will need to pay property tax and buy an insurance plan for your new home. These are the additional expenses that millennials usually haven’t planned for.
In rented properties, the landlord takes care of the property taxes and covers a particular portion of utility bills, including the water and HVAC ones. However, repairing and maintenance will be under your belt. But since these expenditures are seasonal, they are not heavy on the pocket.
Tips for Property Owners
If you’re planning to rent your property to millennial, then follow these sure-fire ways:
Establish Online Presence
Market your property through social media. Facebook reported that in 2017, 70% of the millennials were influenced through FB and Instagram to make holiday purchases. So upload high-resolution images of your property and the location. Share a catchy post now and then targeting the right audience.
Highlight the Benefits
When renting a product or service, millennials look at the benefit it offers. If you allow pets or have installed an eco-friendly power generator or have high-tech features, promote it. This will entice them to rent your property.
Providing Accessible Payment Options
Since millennials tend to have a busy life schedule, they opt for easy and quick solutions. This reason is why you might not have seen them write a check. Credit cards, electronic or online payment works best for millennials.
Millennials are quite diverse in their choices, but if you market your property right, you are surely going to attract them as lifelong customers. It is the only segment of the society that relies heavily on rented properties as a permanent lifestyle.
Hi, I’m just an inspired recent real estate beginner investor named Miguel Rivera from a modest town neighborhood called Pigeon Hill in Aurora, Illinois, the City of Lights! I have 3 years in so far investing in real estate and excited to continue to walk my chosen path to reach my ultimate financial goal of living off my rental income before I reach 35 years old! Driven by infinite growth potential and guided by my mentor, I managed to get started and make it work with just a modest salary, practically no education in the field, learning and applying some key habits. This website is a collection of all things that I have learned so far that I wish can help other recent real estate investors! Click here to view more about my story.