- The vast majority of U.S. investors are keen to include real estate in their portfolio, according to new research commissioned by Better Homes and Gardens Real Estate.
- More than 95 percent of millennial investors are interested in making a real estate investment, more so than their baby boomer counterparts (83 percent).
- In many cases, millennials' first investment is not for them to live in full-time. Rather, it gets them on the property ladder and offers another type of lifestyle.
Realtor Kim Soper is helping a young professional woman buy her first property in Lexington, Kentucky.
The client expects to move in five to seven years, so it will be more of an investment than a long-term home.
Soper, who is also the co-founder of Better Homes and Gardens Real Estate (BHGRE) Cypress, is advising her to think about buying a single-family home rather than a condominium because she won’t have to worry about the monthly payments that usually accompany a condo purchase on top of the mortgage.
According to Soper, professional, single millennial women are one of the largest buying groups right now.
The newly published Better Homes and Gardens Real Estate Investors Survey, conducted on BHGRE’s behalf by Wakefield Research and featuring responses from 1,000 U.S. investors during June/July this year, has revealed some interesting investor buying patterns by millennials.
What types of investors are millennials?
More than 95 percent of millennial investors surveyed in the research said they were interested in making a real estate investment, showing greater interest than their baby boomer counterparts (83 percent).
According to Sherry Chris, president and CEO of BHGRE, one of the insights they found was that millennials are not buying real estate in the conventional way.
“They are renting apartments but buying income in other parts of the state, using those (second) properties as vacation, weekend getaways, renting them out on Airbnb,” she said.
It’s considered “non-traditional real estate investment,” and the trend is important for agents to understand, she said.
Millennials are living in large urban centers and then buying investment second homes in smaller communities (further out) so they can enjoy the outdoors, she said.
“It’s very cost effective, an easy drive from the city, but these are communities where they can have a different lifestyle — we are seeing that as something that is coming to the forefront,” said the CEO.
“Much has been written about millennials not being interested in real estate, but this research shows there is an understanding about the importance of real estate as a long term investment.
“And for those of us in the industry, that’s what we talk about — for the next days of your life, real estate is a great long-term investment.”
Family, funds and stability
Another insight to come out of the BHGRE research is that nearly 90 percent of the U.S. investors surveyed want to include real estate in their investment portfolio, and 80 percent believe a real estate portfolio is one of the best financial legacies they could leave for their family.
Interest in real estate as a means for financial stability, and additional income is very high right now, said the company.
The research found that more than 83 percent of parents who invest would willingly consider buying investment property for or with their children or grandchildren.
These individuals would consider co-managing and profiting from the investment together, having their children or grandchildren live in the home during college or for it to help fund college tuition down the line.
Soper added: “When grandparents and parents make that purchase, it teaches their children about the ownership of real estate, the American Dream.”
Real estate seems to have recaptured its reputation as an important part of any investment portfolio, according to the research.
Investors in the survey, who believe real estate has been a key factor in helping them achieve financial success (80 percent), have a strong intention of investing in more.
Nearly 85 percent who have invested in real estate indicated that they will make another purchase in the near future (with two in five planning to do so in less than a year).
“To see consumer confidence of this magnitude is very promising,” Chris said. “Through this research, we’ve discovered that a majority of investors, including millennials, Gen Xers and baby boomers, believe real estate is the best way to diversify an investment portfolio.”
Experienced investors still need professional help
And although they may be experienced property investors in some cases, approximately 53 percent of respondents expected to use a real estate agent to advise on managing the investment, as well as to provide guidance on terms (49 percent) and down payment advice (47 percent).
What is BHGRE planning to do with this information? Step up its agents’ knowledge of the investment market, said Chris.
“In our training offer to brokers and agents, we will be incorporating this data into sessions, talking about how to capture investor interest, how to work with them and how to market to them,” said the CEO.
Added Soper: “This helps us make agents feel confident about going into talk to investor groups. Knowledge is a powerful thing.”
Agents should spend time learning and knowing their market so they can help service clients.
“These are good tools for execution,” she said.