Millennials, defined as those born from 1982 to 2000, now hold an estimated population of 84 million in the U.S. Millennials are now the largest age group, outnumbering the baby boomer generation by a population of 10 million. What does this mean for the future of real estate investing? As this upward trend continues, we can expect more millennials to invest in real estate.
Real Estate Investments Seen as the Most Valuable Asset
As millennials begin to land steady occupations and seek financial stability, where to invest one’s hard earned money becomes the question. Real estate is seen as the most valuable asset by far. Research from Fannie Mae reported that 85 percent of millennials agree real estate is a good investment.
This generation is most likely to value real estate, over any other asset class, such as stocks, due to the lingering skepticism from the stock market crash, that contributed to the 2008 recession. Many millennials were attending or graduating from college, and entering the job market during the financial recession. During this time it was difficult for many college students and graduates to find jobs. That time period of financial stress also affected millennials’ families, leaving a bad impression of the stock market in this group’s minds.
Millennials Have Alternative Ways to Invest in Real Estate
Living in the digital age, technology now plays a huge role when investing in real estate, giving millennials the advantage. According to the National Association of Realtors Research Department, 99 percent of millennials use the internet to search for homes and 58 percent found homes on a mobile device, further illustrating this generation’s stronghold on technology. As the millennial age group ventures into real estate, this group will have multiple ways to invest.
Marketplace Lending Sites
The first option for millennials to invest in real estate is through online marketplace lending sites, such as Sharestates. Sharestates allows accredited investors to invest in various real estate types, with as little as $1,000. Many millennials seek full access when diversifying their investment portfolios, a convenience of marketplace lending sites. Marketplace lending and real estate crowdfunding are secure options for millennials. The investments are guaranteed by the property and the borrower itself, unlike most REITs that are traded on the volatile and unpredictable stock market.
Airbnb and Rental House Investing
Millennials seeking another form of income can consider Airbnb and rental house investing. Airbnb allows homeowners to rent out the entire home or a section, for a specific amount of time. The income earned can help the homeowner build equity or pay the mortgage. Airbnb is already a popular choice amongst millennials when seeking rentals to lodge in, it is only a matter of time until this group will use Airbnb as a source of income.
Real Estate Investing Challenges Millennials Will Face in the Future
As much as millennials are eager to invest in real estate, they have some challenges to overcome. According to FICO, many millennial home buyers can’t obtain loans backed by Fannie Mae, because many don’t meet the median credit score of 750. These poor credit scores can be attributed to the high amounts of student debt weighed on millennials. Student Loan Hero reported that the class of 2016 graduates have an average of $37,172 in student loan debt, a 6 percent increase from the previous year. These obstacles make it difficult for millennials to dive into the world of real estate investing.
Real estate investing is proving to be a tougher journey for millennials compared to older generations, but the millennial generation is determined. As this generation increasingly outnumbers the baby boomer generation, millennials are expected to become the majority of real estate investors. Millennials already see real estate as the best investment class, and have multiple ways to invest in real estate. Once millennials are able to overcome their financial challenges, the future of real estate investing will be strong.