Did you know that 1 in every 5 Millennials never plan to buy a house? As a real estate investor this could sound like a bad thing - but today’s episode is just the first peek into the world of MultiFamily investing, and why it might be exactly the asset class you should look at!
Did you know that 1 in every 5 Millennials never plan to buy a house? As a real estate investor this could sound like a bad thing - but today’s episode is just the first peek into the world of MultiFamily investing, and why it might be exactly the asset class you should look at!
BIG TAKE-AWAYS:
Steven Pesavento 00:00
What are some of the core benefits of investing in multifamily apartments? Well, right now in this episode, we're diving deep into the demand driver. And why multifamily is a key piece of every smart investors portfolio that more in this episode, let's get to it.
Steven Pesavento 00:15
This is the Investor Mindset podcasts. And I'm Steven Pesavento. And for as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.
Steven Pesavento 00:37
Welcome back to this week's episode of the mindset minutes on the Investor Mindset podcasts. And I'm Steven Pesavento. And each week we dive into mindset tips and investing strategies that can help take your career to the next level. And in this episode, we're diving into multifamily apartments and specifically the demand driver of what makes this such an appealing investment and why so many investors are looking to add this to their portfolio right now and, and why you might want to consider yourself, join us each week as we share more strategies and tools that can help take your investing game to the next level and dive deeper into some of these topics. And if you're just joining us, make sure you hit that subscribe button so you never miss an episode. So as we look at multifamily, there's a lot of reasons why people really love it. There's a lot of reasons why everyday investors are flocking to this as one of their key places to be investing. And one of the reasons is because it's really easy to understand the demand driver and and understand what this means when I'm investing in apartments, right? Everybody needs a place to live. And what we're seeing is that over time, people have been choosing multifamily and apartments as their place to call home more so than any other time in history. I'm gonna walk you through some numbers here. And, and I think this is really going to help paint a picture about why this has become such a popular option for investors. And you know why it's something that you might want to consider. So, as a whole since 2008, with the massive growth in the economy, we've actually seen a huge rise in the number of renters. And it's surprising it's year over year growth. And you think as the economy is coming back, people will be moving more towards buying houses and and making some of those changes. But you know, what we actually saw was over a 10 year period following the Great Recession, that renters increased by over 23 million renters in total in comparison to them, or home owners only increased by 700,000. You know, this is for a lot of reasons. But in part, it's because people are choosing to go the apartment route for flexibility and for the fact that you know, housing has become unaffordable in some ways to folks, and they're choosing to not take on some of the responsibilities that go along with owning a home. You know, according to CBRE multifamily properties, rent also declined less in the previous recession, including back in 2001, and in 2008, in 2009. So, you know, seeing the lowest level of rental decline, and the fastest recovery to pre recession peaks. So what does that mean, when you're comparing multifamily to some of the other commercial asset classes and asset types? What we saw in 2001, and we saw again, in 2008, and 2009, was that rent declined less during those recessions for multifamily in comparison with any other asset class, and it actually came back faster and stronger during that same exact timeframe.
Steven Pesavento 03:28
So what does that mean? That means that, you know, in the past multifamily has been strong, both in a recovery, and during a recession, which is really important, as you're investing your money, you want to make sure that we're placing it, and we're investing in assets that are going to be able to hold, be able to hold their value, because as we see deflation or inflation happening, as we see the economy going up and down, we want to make sure that we're invested in assets that are going to secure us in those types of environments. And there's two really big demographic drivers that are making a big difference in the multifamily space. And though, across generations, we're seeing massive growth in the number of renters, we're seeing two generations in particular, that we're keeping our eye on, and it might be something you guys might want to think about keeping your eye on as well. And that comes down to the baby boomers and the millennials. And when we think about it from a millennial perspective, you know, what is a millennial that is somebody who's born between 1981 to 1996. So, you know, right now, in 2020, that person's ranging between 24 to 39 years old, and a baby boomer, you know, to contrast is somebody born between 1946 to 64. And they're in the age range of, you know, 55 to 74. So, complete opposite ends of the spectrum. Here as far as age demographic, what we're seeing is actually a growth from both of these demos. So if we look at millennials, first and foremost, it's not a surprise that millennials are choosing to rent more so than ever before. They were coming to age and you know, Coming into adulthood during one of the greatest recessions of their generation, a time that was really tough on them and their families, and they saw a lot of people lose their homes.
Steven Pesavento 05:10
And, you know, frankly, you know, while they're graduating from college, some of these older millennials, you know, were coming into the workforce at a time where they ended up losing massive amounts of income potential, because they weren't able to get jobs at their education level. Because when you're coming in to education, where you're coming out of school, during a recession, things are tougher. But you know, what the numbers actually show us is that the US Census Bureau data shows that renting represents the most frequent housing type for millennials. And you know, why they tend to prefer this, of course, is, you know, flexibility and mobility. And, frankly, they can afford it. It's one of those things where as housing prices increase, and their income is increasing, but maybe not at the same rate, they're making some decisions in their life, choosing to not save money, and invest into a home, and instead live more of a lifestyle, you know, focus on where they're spending their their dollars, and nearly one in five Millennials say they plan to rent forever, according to an apartment lists survey, which just completely blows my mind. But it's not surprising, there's a lot of benefits to renting, you know, you get that mobility and flexibility, people are moving more than they ever have, they like to not have to deal with the maintenance that comes along with it. And, you know, we can see this because while home ownership is dramatically lower for this generation than others, you know, over 64% of the overall population own a home, while millennials in that younger range of 25 to 29 are seeing just 31% homeownership nearly half and in that range of 30 to 34. It's about 45%. So that's a huge difference in the number of the overall population when compared to millennials. And we're definitely starting to see this change. And some folks are starting to buy houses at a higher rate than they have before. But we still expect millennials to still take on a large percentage of the renting population, as some of the benefits that we've kind of talked about is just goes along with, you know, a vision and a visual mindset that they happen to think about the way they live their lives and having that flexibility.
Steven Pesavento 07:16
You know, boomers, on the other hand, this one's a little bit of a surprise. But you know, according to a Freddie Mac survey back in 2020, over 5 million baby boomers expect to rent their next home, over 5 million. And why is that that's because they're desiring to be closer to the city, they're desiring to be able to live closer to their family, to have hassle free maintenance, living, to not have to deal with, you know, yard work or fixing up their home or doing those repairs that are frankly getting harder for some folks to take care of. And they're looking to take advantage of living a little bit more of some of those luxurious amenities that you're often seeing in some of these, you know, a class style apartments. So, you know, as boomers start to continue to grow into this renter space, you know, as many more folks are moving in that direction, we're going to see a demand increase in the multifamily Arena in the multifamily space for for new rental housing for these folks. And, you know, over the next 10 years, over 11,000, Americans will turn 65 Every single day. And if this trend continues, we're going to continue to see more and more renters. So, you know, what does this mean?
Steven Pesavento 08:28
Well, you know, across asset classes, this is just one of the things that you look for, you look for, where's that demand coming from and who is going to end up being that renter, and we're gonna continue to see more and more people choose to rent homes, if this trend continues. And, you know, as this ends up being a really great choice for a lot of folks to be able to call their rental apartment, their home, we're gonna see more and more investors move in this direction. And as you're looking at investing in multifamily at scale, when you're talking about 6080 100 200, large apartment buildings, there ends up being a lot of benefits that we'll get into in future episodes. And as well as we'll get into in depth in the editorial I talked about at the beginning. So make sure you head over to the investor mindset calm. If you want to dive deep into some of the sources of this information, and learn a little bit more about what we're going to be talking about in future episodes. At the end of the day, it's simple to understand the economics of multifamily because we all need a home to live, we all need a place, you know, to lay our head at night and be able to come back and for a lot of us that are working from home, we need a place to be able to actually do what we do to earn money. And so a lot of folks are continuing to move in this direction. So it becomes an asset class that's easy for you know, general everyday person to understand and what we're seeing here is these two generations Millennials and Boomers are making some big shifts and as they continue to make those shifts and choose multifamily as their go to choice for housing, that's going to be great for investors. You know, right now 18 point 4 million Millennials head up rental households when compared to 12 point 9 million Generation X and 10 point 4 million boomers.
Steven Pesavento 10:13
And as I mentioned, the boomers are growing and the number of folks that are moving into the rental arena, and the millennials, we don't really see them backing down, we don't really see people in that generation deciding to, to not continue renting, right, of course, some folks are going to be able to step up into homeownership, and some people are choosing to make that a part of their life. But the numbers aren't really showing that it's happening at a huge percentage, that is something that we would want to worry about in the multifamily space. So of course, whenever you're investing, you've got to make smart decisions, you got to be investing on a local level. But the numbers are different depending on where you're looking, you know, in some far off, you know, rural areas, people preferring to live in a home then. But in the cities, obviously multifamily is much more popular. Definitely make sure that wherever you're choosing to invest the operator or yourself are really diving into those numbers to understand well, does the economics make sense in this area? Are we going to continue to see population growth in the area where this apartment are we going to see continued demand growth in this area, which is something that we always do whenever we're investing in any type of asset class, you know. So this is just one of many things to consider on whether or not you want to be active or passive and adding multifamily in your portfolio. And like I said, if you want to learn more, we're going to continue to put out more great resources and have this as a hub at the investor mindset calm. So make sure you join us next week, as we're going to be diving in more on the multifamily front. And in future weeks really diving into other asset classes and uncovering what you need to educate yourself so that you can make smart investing decisions, you can find out all the information at that link that I told you.
Steven Pesavento 11:51
And I really I have to say thank you guys so much for joining me, it's such a pleasure to be able to serve you guys. It's been such a pleasure put so many episodes together for the investor mindset audience. And I'll leave you as I always leave you and that's to live a life worth inspiring others. And you can do so today by taking what you learned here and actually applying making some decisions on what you're going to do with your life and diving in to learn a little bit more. So with that, I have to thank you guys again, please make sure you hit that subscribe button so you don't miss another episode. And you can tell all of the algorithms that were putting out great content. If you're listening on YouTube, hit that thumbs up button makes you hit the notification. And I really have to ask you if you can drop a five star review on your favorite platform to let the algorithm know hey, we need to share this with more people. So with that, I'll see you guys
Steven Pesavento 12:44
Thank you for listening to the investor mindset podcast. If you liked what you heard, make sure to rate reviews, subscribe and share it with a friend. Head over to the investormindset.com to join the insider club where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.