Despite their reputation as 'commitment phobic,' Millennials may be more willing to commit to a good investment than you might think!
According to the National Association of Realtors 2017 report on generational trends, Millennials and Gen Xers, those 36 and younger, make up the largest share of home buyers. Millennials also represent 66 percent of first-time home buyers, and according to research from TD Bank, nearly two-thirds of Millennials are saving up cash to buy their first home.
Still, Millennials are investing differently from generations past; and seem careful to avoid some mistakes of their predecessors. Well aware of the financial crash of 07/08, Millennials are reluctant to commit to purchasing anything that's above their means. They're also unlikely to succumb to pressure to conform to society's expectations; and unafraid to do their own research to make sure they're getting the best deal. And armed with a wealth of online tools -Zillow's just released a website dedicated to helping Millennials buy their first home -today's generations are in a better position than ever to conduct research and weigh up their options.
For many Millennials, though, a home isn't just a place to hang your hat; but more importantly, it's an investment. Many first-time buyers today are increasingly viewing homes as an asset rather than strictly as a roof over their heads.
What's guiding the Millinnials in their investment and home buying decisions? Let's take a look at what can be known as the 'Millennial's guide to real estate' and see what we can learn from this generation's unique, yet effective, approach!
1. Buy a House That You Can Afford
While most Millennials didn't experience the recession first-hand, they still felt its effects. Many would have seen their parents go through underwater mortgages or even foreclosure. As such, they're leery to commit to more than they can afford.
"My husband and I thought we'd buy a home earlier," says Dorinda Smith, president and CEO of SunTrust Mortgage, "But we fell into the millennial group that when we were saving up to buy a house, the housing market crashed. We found ourselves in a group that was gun-shy for buying a house."
With the 08 recession still relatively fresh in their minds, Millennials want to buy property that's worth the asking price. What they don't want is to feel pressured into maxing out their finances every month, to pay down a mortgage that they can't afford.
2. View Property is a Long-Term Investment
Homes provide a place to live, but Millennials know that they can also make great investments. But rather than looking at short-term, and more risky, real estate investments -like house flipping, or other fast money schemes, many Millennials prefer a more tried and true, long-term approach.
For Millennials who are in it for the long-term; rental properties are where it's at. Brandon Turner, Millennial real estate investor and founder of the popular real estate investment blog, Bigger Pockets, offers advice for other up-and-coming investors. In fact, he's written the book on creative financing for real estate; and shows how he and his wife were able quit their jobs by 27, thanks to the income that they were generating from their rental properties -a blueprint for young and motivated investors.
3. Go for Investments that Put You in Control
According to a RealtyShares survey, 20 percent of Millennials indicated they believe real estate has performed the best since 2000 -the largest age group that holds that belief.
One of the things that makes real estate so appealing to Millennials, is the ability to manage their own investments. Unlike stocks and shares, where you're largely at the mercy of the markets, with real estate, you can take steps to directly improve your returns. For example, by renovating, you can make your home more attractive or help it to command a better rental price. Plus, while stocks as an intangible asset are difficult to quantify, with real estate, you have something tangible -a fact that appeals to many young investors; including the popular personal financial blogger, Financial Samarai
4. Pool Your Resources
Buying a home is expensive -and Millennials are getting creative with how they buy. Going in on the purchase with others -or even having mom and dad co-sign on the lease is one common approach. In fact, a report from Experian states that two-thirds of Millennials have used a co-signer, usually their parents, at some point. Buying property with an investment partner certainly isn't off the cards.
5. Conduct Your Own Research
They may be willing to have a co-signer, but they aren't ready to just accept advice blindly. Millennials are less likely to trust the advice of a real estate agent/parent/well-meaning outsider, and more likely to do their own research when it comes to purchasing property. And thanks to the wealth of tools and information that's available online today, with as websites like Trulia and Zillow -property facts and historical home value data is just a click away.
6. Just Do It!
Finally, Millennials know the importance of taking action. They understand that while it's extremely important to enter into any home purchase with your eyes wide open, there comes a point where you just have to take the plunge. You'll never really feel 100 percent certain about it.
Brandon Marcott, a 30-year-old financial planner, says he didn't feel like he was ready to buy a home when he and his wife purchased their house a year and a half ago.
"We felt pressure from multiple sides telling us, 'Now is the time!'" he says. Still, Marcott, a father of two says he is glad to have a fixed monthly mortgage payment -one that won't go up like rent can do. "This is by far my favorite benefit," he says.
While Millennials have their own distinctive investment style, it's one that's especially suited for today's uncertain economic climate. With rising house prices and threat of a potential bubble, it pays to be cautious, and to look for investments that are less volatile and more long-term.
As we reach a new chapter in homeownership, investors can benefit by adopting a similar approach; and viewing real estate with both interest, and care. And with rental properties providing to be an especially solid financial investment today, it seems that Millennials are on the right track.
Or, as Forbes contributor Nav Athwal puts it, "The data says real estate has the capacity to be the best investment, and millennials are on board."
Millennials: do you agree? Which other tips would you add to this list?
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