Forbes reported recently that 55 percent of millennials are interested in real estate investing. That statistic itself isn’t as fascinating as other data suggested by the same survey. It turns out that a higher percentage of millennials than any other generations correctly identified real estate as the best performing investment class since 2000.
In 2008, the floor fell out of the real estate market. Home prices had fallen for two straight years. Things just weren’t looking well.
But things have started picking up again. In fact, the National Association of Realtors says people under age 35 made up 61 percent of the first-time homebuyers last year. Millennials have discovered real estate, just in time for the market to bounce back.
Homebuyers Are Not Real Estate Investors
Buying a family home isn’t the same as investing in real estate. Primary residences are often seen as liabilities on the family balance sheet whereas investment properties are assets. That’s because they have drastically different purposes. A mortgage is an expense, and families don’t typically earn returns on their primary residence. With an investment property, you can resell it or rent it out.
So what does this have to do with millennials? Since this coming-of-age generation has discovered homebuying, it’s just a leap from there to investing. Besides, millennials have shown that they are well aware of the pitfalls of the stock market and the potential rewards of real estate investing.
As the Forbes article shows, millennials were beginning to graduate college when the Great Recession hit. They’ve lived through the mortgage crisis and have witnessed other banking scandals, which have caused millennials to lose trust in traditional financial institutions. Instead, they’d rather bank on something tangible, like real estate.
Once a person buys their first home and begins to understand how mortgages work in the real world, its much easier to get them to see the practical benefits of real estate investing. Millennials are ready.
Why Marketplace Lending is Ready for Millennials
When you add all of this together—millennials have discovered homebuying, they’re suspicious of banks and the stock market, and they’ve correctly identified real estate investing as outperforming the stock market since 2000—it makes sense that millennials are ready for real estate investing. Then, when you add the advent of peer-to-peer technology to the stack, the next stage of growth for most millennials is real estate crowdfunding, or marketplace lending.
With marketplace lending, millennials don’t have to tie up as much cash for as long as they would if they went out and bought up properties in their local markets. With a $1,000 investment, millennials can see double-digit returns and be home for dinner.
By starting small, millennials can test the waters of real estate marketplace lending, understand how investments perform over time, see their monthly returns grow respectably, and be in total control without the need for a financial advisor or money manager making decisions for them. These are all things that millennials value, and as they continue to learn the benefits of real estate investing, they can diversify their portfolios into more asset classes and achieve a better mix of overall investments.
Of course, marketplace lending isn’t just for millennials, but millennials have proven that they know where the best performing investments have been for the last 17 years. Now, it’s just a matter of taking advantage of that knowledge.