Why Millennials Should Be Investing in Real Estate
For the longest time, millennials were not thought of as the investing generation. When some people hear “millennials,” they think of lazy or entitled young people who prioritize instant gratification over the hard work needed for long term success. Even now, millennials are slower to invest in real estate than previous generations.
This slow uptake in investment has been driven by student debt burdens and a generational culture shaped by a desire for in-the-moment experiences. Millennials are more likely to choose travel and career flexibility over purchasing property and setting down roots than previous generations, however this paradigm is slowly shifting.
Millennials have arrived in force to the real estate market. In recent years, increasing millennial incomes and the rise of remote work have made real estate investments more attractive and feasible. The National Association of Realtors reported that millennials now make up 43% of home buyers. This indicates that millennials are beginning to tap into real estate as a long term source of wealth and stability.
Fortunately for millennials, the options and accessibility for real estate investing are the best they’ve ever been. Here at Reiturn we are proud to be one of those accessible options driving the rise in millennial real estate investments. In this blog we’ll break down both why real estate investing should be on every millennial’s radar and how to pursue real estate investment options.
Why Millennials Should Invest in Real Estate: Building Wealth for a Financially Independent Future
Stability of Real Estate Value
As you’ll hear us say over and over again in our content, real estate investing is one of the most lucrative, stable, and long term investment options. While economic cycles rise and fall, and crypto currencies come and go (Dogecoin who?), one thing is for sure: people will always need places to live and do business. This is why real estate’s value is consistent and high.
For millennials looking to establish themselves, real estate offers a tangible investment. This kind of wealth has shown to hold its value, even in the face of dire economic straits. Many millennials have just cast off heavy debt burdens (student or otherwise) and are in a position to build a financial foundation for the first time. Millennials cannot be careless in how they construct this foundation, as we face very uncertain financial times in our day. Inflation, interest rate hikes, and geopolitical instability all contribute to this instability. To build for the future, millennials would do well to invest in the concrete wealth of real estate.
Advantages of Real Estate Ownership and Operation
Beyond being a physical, universally desirable asset, real estate ownership helps build wealth by offering income tax savings, generating rental income, and having the high likelihood to appreciate in value over time. On the income tax front, you can deduct expenses for property operation, management, and maintenance.
These expenses include property taxes, property insurance, mortgage interest, property management fees, and maintenance costs. These tax breaks are just a few of those offered by property ownership. Deductions from pass-throughs, capital gains, deferment incentive programs, and income not subject to FICA taxes are all potential tax savings. Less tax means more net income to reinvest and build wealth with.
One of the most attractive parts of investing in residential or commercial properties is generating rental income. You may make a huge splash from selling your property that has appreciated in value over time both from your physical improvements to that property and market fluctuations. However, rental income provides steady cash flow from your investment.
Rental revenue is not subject to an income or capital gains tax either. Rental income is a great hedge against inflation. Rental incomes tend to increase as inflation increases, offsetting the real estate owner’s own rising expenses caused by inflation. Investing to own rental properties is an efficient and effective way to increase income that can be used to pay off lingering student (or other kinds of) debt, increase savings, or reinvest in real estate.
Real estate is a great tool for wealth building because of its tendency to appreciate in value. A property that is left to rot typically won't appreciate on its own (though it's possible if land and location on which the property sits on rises in value). But if you combine steady investment in maintenance and improvements with a real estate market that tends to increase in value, you’re looking at an asset that has great potential to grow your wealth over time.
Real Estate and Financial Independence
It’s safe to say that real estate investing is a great way to grow your wealth over time. For millennials, real estate offers a great opportunity to shake off remaining debt and start building for a financially independent future. There’s no magic solution to getting rid of debt and becoming financially independent. However the cash flow potential of owning and operating rental properties (as well as buying REITs which offer regular dividends) and the long term gains through appreciation and investing in real estate crowdfunding or private equity offer significant opportunities to eliminate debt and generate long term wealth.
How Millennials Should Invest in Real Estate
So practically how should millennials begin investing in real estate? Millennials as a whole are beginning to buy more property, although not every millennial is ready to directly invest in real estate yet. Millennials that are buying property are typically those who have paid off their student loans or did not have student debt to begin with. The path to real estate ownership for millennials without a college degree and in some minority groups is more difficult. The Federal Reserve Bank of St. Louis reports that millennials without a college degree have 19% less family wealth than previous generations, and Black millennials have 52% less family wealth than previous generations had at the same age. Achieving real estate ownership and having the resources for real estate investments is not universal across the millennial generation.
Just because every millennial is not in a position to buy properties and directly invest in real estate, doesn't mean they can’t enjoy the benefits of investing in real estate. Crowdfunding and low minimum REITs are on the rise. These organizations are striving to make the fruits of real estate investing more accessible to all. Such organizations purchase, own, and operate real estate using investors’ pooled funds. The benefits they reap from owning and operating these properties are passed back to their shareholders.
Reiturn is one of those organizations. Even if you’re not looking to invest much, there are plenty of options with low minimums. Here at Reiturn, we have a $500 minimum and our fund is open to accredited and non-accredited investors. Seeing as most real estate private equity funds require you to have a yearly income of over $200,000 and a minimum investment of a few hundred thousand dollars, real estate funds like Reiturn are taking big steps to accessible real estate investment.
Conclusion
Millennials are now the largest living generation in the United States. They are becoming an investing force in the real estate market. Options for real estate investments are many. Direct purchase, ownership, and operation of real estate is profitable but requires a large upfront investment and requires a lot of work to maintain and operate. Private equity real estate is only for the most savvy, affluent investors. Fortunately, crowdfunding and low-minimum REITs are reducing these barriers to real estate investing. If you're a millennial ready to join the party and tap into the benefits of real estate investment to build for your future, we here at Reiturn are ready to help.
