Young Buyers Focus on Investment Properties to Build Wealth
Many under the age of 40 are looking at real estate as a means to generate income rather than looking for their own home to live in, a new survey shows.
A growing number of young adults are charting a different path toward building wealth through homeownership, prioritizing buying an investment property before a primary residence, according to a new survey by Mynd, a company that leverages technology tools to help investors buy, finance and manage single-family rental properties.
Forty-three percent of people younger than 40 say they are considering becoming “rentvestors,” who continue to rent their own home while shoring up income from an investment property, Mynd’s 2022 Consumer Insights Report shows. That compares to just 9% of baby boomers and 27% of Gen Xers who are using the same wealth-building strategy. Some first-time investors see this as an opportunity to make more money and better afford a lifestyle in larger, more expensive markets, the report notes.
“Young people are discovering that buying an investment property gives them the best of both worlds: They can live wherever they want, including cities where they can’t yet afford to buy, and still become property owners, which, as we learned in our survey, is still considered an important part of their American dream,” says Mynd founder and CEO Doug Brien. “Buying an investment property means they can go where their life, their work and their sense of purpose takes them without being tied down, and they can still benefit from the diversification, appreciation and tax benefits of real estate investing.”
As the economy teeters on the brink of recession, diversifying a portfolio may become a bigger priority for prospective buyers. Brien notes that many millennials, who came of age during the Great Recession in 2008, watched their parents and others face great financial loss because they were overleveraged on their mortgages. “This cohort is also more skeptical of the stock and bonds market,” Brien says.
But young adults appear optimistic about real estate’s long-term potential. Brien says he believes many of the younger people buying investment properties don’t necessarily view it as a step toward purchasing a primary residence but as an investment that will live alongside their home one day.
The Remote Investor
Remote investing is another trend helping more first-time investors take the leap. More than half of the properties Mynd manages are owned by out-of-state investors. The company has predicted that number to grow as technology makes it easier to buy and manage investment properties from afar. That doesn’t appear to be a scary thought to consumers: Seventy-two percent of the more than 1,000 survey respondents say they’d consider buying an investment property in a different city or state than where they live.
“For decades, the real estate investment class was seen as too complicated and intimidating for many consumers,” Brien says. “Fast forward to today: Consumers now have access to a slew of tools and platforms that demystify the real estate investment process.” He added that Mynd’s mission has been to help inspire a new crop of investors “who were previously too intimidated by real estate or were constrained to investments within commuting distance.”
Tech property management companies have been introducing tools to help novice and experienced investors alike find, finance, purchase and manage properties remotely.
As recession fears mount, single-family rental investments could grow into an even more attractive asset class, Brien says. “As inflation rises, rents are bound to rise, which increases potential cashflow for property owners.”
Twenty-eight percent of survey respondents say they’re considering purchasing an investment property now, despite the current economic climate. “As the Federal Reserve increases interest rates in an effort to tamp down inflation, that can impact demand for rental homes, too,” Brien says. “If it becomes more expensive for potential buyers to finance a purchase, fewer will be able to afford it. This will increase demand for single-family homes and create more upward pressure on rental prices.”