Millennials are on the move! All the data shows that young adults who “came of age” during and in the immediate wake of the housing and financial crises are the most nomadic generation yet. Fortunately, Think Realty Magazine has the run-down on the why they move and what they are looking for in a rental unit. Just don’t expect them to stay longer than a few years unless you can provide them with that perfect location.
First, let’s break this generation down by the numbers according Centsai, a “financial wellness platform” focused on Millennials:
76: Number of Millennials (in millions) living in America today. They make up the largest living generation in America.
19: Millennials’ ages cross a range of 19 years by most definitions. The youngest were born in 2001 and the oldest in 1982.
41: Percentage of millennials who say that their next residence will not be their permanent home.
53: Percentage of millennials who are “vacation movers” and say that they will make another vacation move in the next five years.
74: Percentage of millennials who relocate to a new city with a timeline for their next move already in minD.
So how can real estate investors appeal to these nomadic millennials and offer them housing that meets their needs, budgets, and requirements?
First of all, let’s look at the top three reasons that millennials move: to start a new job (40 percent), to enjoy a new lifestyle or experience (30 percent), and in hopes of finding a job (26 percent). Because most millennials are not ready to settle down and prefer to be “vacation movers,” which means they find up-and-coming cities in which to live, work and play until they are ready for the next “vacation move,” they take new jobs, look for new jobs and find new adventures much more easily than other generations, including those that follow them.
“Our Mayflower agents across the country are moving millennials as they explore new cities, jobs and experiences, but our research shows that this generation does have plans to eventually settle down and choose a city as their permanent home,” said Melissa Sullivan, manager of marketing communications at Mayflower Transit. “The findings of this year’s Mayflower Mover Insights study reinforce what our agents are hearing every day: millennials are excited about their new homes, jobs and adventures.”
In particular, millennials are seeking urban city centers or cities where they can live without a car. According to a 2014 Rockefeller Foundation survey 86 percent of millennials said it was important for the city they live in to have place to live and work without relying on a vehicle, and nearly half of those surveyed who owned a vehicle said they would give it up if they could rely on public transportation options. Given that more than two-thirds of millennials already reside within their local city limits or in an “inner suburb” very near the metro area, this willingness to forego conventional automotive transit is probably the most significant factor to consider when investing in real estate with the express intent of renting or selling it to millennials.
Meet the Millennial Renter
Millennials are definitely renters by nature. They want affordable rental units in many of the top investing cities in the United States, and it is largely up to investors to provide these units although there are some multifamily developers catering to this group. Granted, they may not stay for more than a few years, but the good news for investors is that reliable transit alternatives for renters really never go “out of style.”
Furthermore, millennials are likely to rent for the duration of their stay in an area even if they do decide to settle down permanently or semi-permanently. Even though interest rates have stayed relatively low, most millennials don’t believe they are financially equipped enough to purchase a home. There have been tighter restraints on credit and mortgage underwriting since The Great Recession, and most millennials are more inclined to rent than purchase a home. Given that they also have more debt than other generations, specifically student loan debt, they often believe that mortgage debt will not serve them well.
Will millennials ever buy? Probably not in the numbers that previous generations have. According to the U.S. Census, home ownership rates among millennials ages 25 through 29 is only 31.8 percent. This is the lowest homeownership rate for that age category on record. Many millennials even believe that owning their own home may not offer the types of financial benefits it once did for prior generations.
Rentals, Rentals, Rentals
If you’re hoping to invest in rental properties that will appeal to millennials, it may pay to keep an old saying fresh in your mind – with a new twist, of course! It’s all about location. Buy in urban neighborhoods, and remember that millennials like community. You may wish to invest in multifamily housing instead of just single-family rentals, or you might opt to invest near areas with clear community centers or near new multifamily developments. Because so many of them do not own cars or would prefer not to do so, millennials value high walkability in an area as well as good access to public transportation. The average millennial drove 23 percent less in 2009 than in 2001 – the sharpest reduction for any age group and a trend likely to continue. Lack of bike storage could be a deal-breaker for a 2-wheeled commuter, and outdoor space in some form is a vital amenity according to most millennial renters. Additionally, a millennial landlord must be prepared to accept two other surprising requirements from their renters: pets and alternative forms of rent payment. About three in every four millennials own a cat or dog and prefer to pay electronically.
No matter where you ultimately decide to invest, it will pay to consider the preferences of this dominant renting generation. They face unique housing situations unlike those of prior generations. With unique housing experiences and preferences come unique needs in both single- and multifamily rental units.
10 Most Desirable Millennial Locales According to Mayflower
1. San Francisco, California
2. Los Angeles, California
3. Washington, D.C.
4. Seattle, Washington
5. Chicago, Illinois
6. New York, New York
7. Dallas, Texas
8. Denver, Colorado
9. Houston, Texas
10. Atlanta, Georgia