The future of rental real estate may be shaped by two fast growing groups of tenants: the young ad the old. And as the rental market continues to heat up, long-term returns await those investors willing to accommodate the surprisingly similar expectations of millennials and seniors.
Millennials, those young adults born between roughly the years of 1983 and 2003, are now the fast growing demographic group in the United States. In sheer numbers, they’ve beaten even the legendary baby boomers.
But those postwar children are now moving to the other end of the spectrum, swelling the ranks of those nearing retirement age. And they’re not the only group whose numbers are swelling. More Americans than ever are reaching very advanced ages. According to recent census data, the number of centenarians – and those living well beyond 100 – has doubled in just a decade, and is expected to triple by 2020.
And it’s those two groups that are increasingly turning to renting dwellings, rather than buying them. Since the housing collapse of a few years ago, fewer American of all ages are opting to buy homes. Homeownership rates in 2014 stood at their lowest in twenty years, as fewer would-be buyers have been able to qualify for mortgages and the specter of foreclosures still haunts former homeowners.
That means a growing and increasingly diverse pool of potential tenants for rental housing of all kinds. Midlife singles and families are also choosing to rent, too – but it’s those groups at either end of the demographic spectrum that are changing the face of rental markets all over the country.
What do these seemingly disparate renters want? And how can savvy investors provide it?
Millennials are typically new or relatively recent college graduates. They’re largely single, or perhaps living with a partner. But they’re choosing to delay marriage and family, perhaps indefinitely. They work, and they’re likely to be carrying a significant amount of student loan debt.
As a group, they tend not to be very attached to possessions, and they’re less likely to buy cars. They’re connected to the digital world, and they love pets. Since they spend much of their time away from home, they don’t mind smaller living spaces. And increasingly they’re environmentally aware and look for green amenities whenever possible.
What does this profile mean for investors working to build wealth through investment property
Rental housing that appeals to this group of tenants might be smaller units in a multiplex rather than a larger single family home. It might be close to city centers with shopping and other amenities that can be reached on foot or by bicycle.
Landlords might want to rethink their “no pets” policy too, since young renters say that pet friendly housing is very important to them. In fact, a recent study on renter profiles found that tenants with pets inflicted less damage on a rental than those with children.
Those on the other end of the spectrum have similar desires. Retirees and those older than 65 are increasingly opting to swap their larger family omes for smaller, lower maintenance housing that’s close to shopping and services including health care. They, too, have companion animals and don’t need much space. Like the millennials, some don’t own cars.
But real estate surveys reveal that these older renters fall into two distinct groups, and their preferences for post-retirement living reflect those profiles. Though it’s less popular than it one was, “active adult” retirement communities still appeal to some. That might include rentals occupied or part of the year, with social activities and a population of likeminded neighbors.
Others prefer living in private dwellings, with amenities available for “aging in place” – accommodations for disabilities and options for care providers to help out if necessary. Investors can make their rental properties appealing to this population with pet-friendly, low maintenance hosing that features good lighting, handicapped access and proximity to shopping and public transportation.
As Jason Hartman says, everyone needs a place to live – and you might as well be the person who provides it. Real estate is the asset that endures – and successful investors change and adapt to the changing forces in the market for long term returns.
Of course, fair housing laws prohibit directly advertising rentals that target – or exclude- any particular category such as age. But landlords can list key features that clearly appeal to these very different groups, and post rental ads in places they frequent.
Keeping rentals occupied with reliable tenants is key to building wealth in rental real estate. And that goal may be easier for landlords who keep the needs of the largest and fastest growing demographics in the country in mind. (Featured image: Flickr/byrdiegyrrl)
Sources:
Fackelman, Kathleen. “Centenarians Increase in Age and Numbers.” USA Today. usatoday.com Accessed 25 Nov2014
Mains, Wade. “Rental Demand. Think Young and Old.” JH.com Content Creation. Facebook group post. 23 Nov 2014
“Population d 65 and Over for the United States 2012 50 2050.” Real Estate Consulting. realestateconsuting.com 23 Nov 2014.
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The Solomon Success Team
