Millennials – those born between about 1983 and 2003 – now make up the largest age group in the US, eclipsing even the legendary baby boomers.
On the other end of the spectrum, the number of centenarians is expected to reach over 200,000 by 2020 – nearly triple the current population.
These rapidly changing demographics of American life are creating big changes in rental real estate – and opening new opportunities for investors willing to accommodate the features these very different groups look for in rental housing.
The demand for rental housing has been steadily rising in the years since the housing collapse of 2008, thanks to a number of factors. Former homeowners left with bad credit can’t buy another home. Wages are stagnant and job prospects limited, which makes it hard for people to save up down payments and qualify for mortgages. And some age groups, particularly the millennials and retirees, just aren’t very interested in buying homes.
Those and other circumstances combine to create a hot rental market, with demand – and rents- rising in many areas. But not all rental housing is created equal. And it turns out that while midlife households with families are more likely o buy a home. Or look for a single family home while renting, the very young – the millennials – and the old – post-65 retirees – want similar amenities in the dwellings they rent.
Investors willing to provide the things these two groups are looking for can claim a niche in the real estate world that can yield returns far into the future.
Acceding to recent housing surveys, mlllennials and seniors both want hassle free, smaller dwellings that are within easy access to a variety of amenities such as shopping, and banks. They’d like accommodations for pets, not kids, and they want a place to socialize.
Millennials seeking places of their own tend to be recent college graduates or young working singles. They’re likely to be carrying a load of student debt and may not have a stable job. As a group, they’re not attached to possessions – but they are attached to the Internet and other mobile devices.
They aren’t interested in marrying and starting families – yet. They probably have pets. And because many of them don’t spend much time at home, they’re not looking for large living spaces. But they do want to live close to work, school and other kinds of amenities.
The takeaway for landlord/investors? Housing that caters to these young singles needs reliable Internet access – and a welcome mat for companion animals. Proximity to city centers and public transportation or bike paths would attract these tenants too – and keep them.
On the other end of the spectrum, older Americans are increasingly choosing to give up their larger family homes for smaller rentals. Study after study reports on the much-feared but also welcomed “graying of America” – a nod to the rapidly growing numbers of those in their 80s, 90s, and beyond, many of whom continue to live independent, vigorous lives.
Rental housing appealing to this group ranges from “active retirement” style communities to small mid city apartments or small homes. Overall, surveys suggest that post retirement renters, like the millennials, want low-maintenance housing that’s friendly to animals and maybe the occasional visit from grandchildren.
This group tends to be social, and looks for housing close to amenities like health care and social activities. Like the millennials, they’d rather walk, bike or take public transportation. Accommodations for disabilities are a plus too, since most seniors hope to “age in place” with a little help from outside if necessary.
They’re doing that in ever-larger numbers too, as more and more people shun assisted living and long-term care. Properties with features such as easy entrance and exit, handicapped access and other features that support independent living invite renters in these older age groups.
What about the groups in between these two extremes? Rental housing is in demand for midlife folks with or without families too, especially since home buying may be out of reach for those with blots on their credit score or financial struggles. But in terms of sheer numbers and growing demand, the two extremes on the demographic spectrum will probably drive much of the demand for rental housing for the next few decades and beyond.
As Jason Hartman says, everybody needs a place to live – and the smart investors can be the ones who provide that place. Investing in properties that appeal to the fastest growing groups in the rental tenant pool may be a very smart move indeed. (Featured image;Flickr/ankakay)
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 Heroic Investing Team