Are you interested in diversifying your portfolio with real estate? You might want to consider researching multifamily property funds because the demand for rental properties is rising faster than ever.
Long before the Covid-19 pandemic took the globe by storm, back in early 2020, the millennial generation (1981 – 1995) has been the nation’s largest group to rent property, over buying it. Some contributing factors to their “buyers hesitancy” can be dated back to the Great Recession of 2007, which is attributed to their massive student loan debt, stagnating wage growth, inflation and rising housing costs for example.
However, that trend seems to be turning for them as more of them enter their 30s. With lower interest rates holding steady, more millennials are looking to purchase their first homes. In 2020, about 79% of all first-time homebuyers purchase applications were by millennial applicants.
So, how is this good news for investing in multifamily property rentals going forward you might be asking? Well, there are two demographic groups important to watch, as more and more of the millennial generation builds families and buys homes, they include:
- Baby Boomers (1946 – 1964)
- Generation Z (1997 – 2015)
One group is in retirement and looking to mingle, while the other is preparing to navigate their lives in a post-pandemic society with very similar hurdles the millennial generation has been struggling with since the last financial recession back in 2007—i.e. They face rising debt challenges, wage discrepancies, inflation, rising home costs, etc.
Both face very different paths, but they’re what’s fueling the rise in demand for apartment construction across the U.S.
Click here to review Caliber’s Palms Apartments Portfolio to learn more about their experience overseeing multifamily development projects.
Why are Baby Boomers Renting More?
From 2007 to 2017, people age 55 and older made up the largest increase in renters in the decade after the recession. For people over 55, rentals increased 38%. For people over 65, it increased by 43%. For those aged 54 and under, renting only rose about 10%.
There are a few reasons why the boomer generation is looking to rent:
Home maintenance vs. apartment leisure
It’s simple. When people get older, it becomes harder to keep up with maintaining both the interior and exterior of a property. Unless they’re a super handyperson, replacing an entire HVAC, or fixing burst pipes may run them thousands of dollars to get repaired. As they get older, most people don’t want to deal with all that goes into renovating and constructing their homes. Or, the hassle of taking care of a yard.
In comparison, apartment living removes the need for the tenant to worry about maintaining anything really inside or outside of it. A lot of apartment complexes are overseen by management teams that schedule and pay (for the most part) anything that needs to be fixed or done inside the apartment, as well as the grounds the renters live on. So, any major repairs to appliances, bug spraying, yard maintenance, painting, etc.—tenants don’t have to worry about it.
Baby Boomers are looking for amenities
There are three classes of Multifamily rental properties:
- Class A – Newly Built, High-end
- Class B – Built between 1990 – 2010, recent renovations
- Class C – Built before 1990, no recent renovations
Many baby boomers are looking into Class A and Class B units because today’s apartments are built with community, amenities and other cool features in mind. For example, many renters, not just Boomers, are looking for places that have:
- Pet-friendly units, dog parks and pet washing facilities
- Recreational areas like fitness centers, pools, hot tubs, community clubhouses, common areas, playgrounds
- Secured garages, assigned parking spaces, electric charging stations
- Gated community, security guards, 24/7 services
Additionally, more and more of these facilities focus on community-centric events that are open to the renters in the complex. They might bring in drink mixologists, host speed dating events, barbeques with dogs, bring in comedians, put on concerts and more.
Finally, some other reasons why boomers are becoming more inclined to rent vs buy include:
- They’re flocking to more walkable urban/suburb areas
- Some are leaving heavily taxed states to more tax-friendly states
- Health issues – there are better run medical facilities in urban/suburb areas where rental options are more prevalent and cheaper to be obtained
Click here to review Caliber’s Roosevelt Townhomes Portfolio to learn more about their experience overseeing multifamily development projects.
Generation Z Has No Choice Except to Rent
Sitting on the other side of the spectrum is generation Z. This demographic is young and the oldest of the generation has barely scratched the surface in today’s workforce.
Like the millennial generation, many of them are opting to live at home or rent as they face some of the same steep challenges in debt, inflation costs, stagnating wage growth, and a super competitive buyer’s market in real estate.
This bodes well for those looking to invest in multifamily rental properties, here’s why:
According to RentCafe, “By 2025, a projected total of 45 million Gen Z-ers will be peak renting age (20-29) — doubling in number. Although many may still live with their parents if economic conditions are unfavorable, a large share of this cohort will be the renters of the next decade.”
It’s also important to remember that this generation grew up with technology in their hands before they could walk. The types of technology and amenities that this demographic wants will influence how new apartment communities will be built going forward into the future too. You may see an influx of “smart” rental communities built that are more environmentally friendly and more connected than ever before.
Cities in the SouthWest U.S. are Growing in Demand for Multifamily Properties
Remote work is more prevalent now due to the pandemic forcing employers to shutter their offices and having their employees work from home. For many companies, it’s been a success. Some are even allowing their employees to work remotely full-time now.
A primary office no longer bounds people to certain geographical locations anymore. This transition is making it easier for people to live and work where they want. People are now prioritizing climate, desired lifestyle and tax situations to determine where they want to live.
Many cities in the SouthWest U.S. are seeing some nice year-over-year rent growth gains:
- Phoenix, AZ – 8.6%
- Glendale, AZ – 11.4%
- Mesa, AZ – 10.7%
- Peoria, AZ – 11.1%
- Chandler, AZ – 11.5%
- Gilbert, AZ – 12.4%
- Avondale, AZ – 16.8%
- Goodyear, AZ – 17.5%
- El Paso, TX – 7.7%
- Arlington, TX – 7.2%
- Temple, TX – 14.3%
- Waco, TX – 14.3%
- Albuquerque, NM – 10%
- Colorado Springs, CO – 9.3%
- Henderson, NV – 11.1%
- Las Vegas, NV – 10%
Are You An Accredited Investor? Check Out Caliber.
There are over 12 million households in the US considered eligible to be accredited investors. If you fall into this category and are looking to diversify your portfolio, there are high-potential alternative opportunities in real estate investing worth looking into.
With Caliber, all its investments are structured so its investors profit first. Additionally, Caliber is an expert on middle-market investments in the Southwest & Mountain West regions of the U.S.—focusing on investments in Arizona, Colorado, Idaho, Nevada, Utah and Texas. With years of experience in this market, Caliber has specialized access to numerous unique groups, politicians, and local businesses that create better processes and greater deal flows for its investors.
As an investor, you can count on Caliber’s long-term track record, its mission of communication and transparency, and its expertise in real-estate investment practices to help you grow your wealth. Caliber offers multiple investment solutions from monthly income to aggressive growth, while also serving as one of the premier qualified opportunity zone fund sponsors in Southwestern, USA.
Don’t miss out on your opportunity to tap into Caliber’s real-estate expertise in acquisitions, asset management, and its ability to sell, refinance, and reinvest.
Now is the time to build your wealth and transform communities today. Contact us at [email protected] to learn more about your investment opportunities today.