How Buy-and-Hold Investors Appeal to Stalled First-Time Homebuyers

A recent report from the National Association of Realtors demonstrates some interesting statistics:

• First-time homebuyers dropped to 24% of the market share (from 32% in 2023).
• First-time buyers are older than ever at 38 on average. All homebuyers average 56 years old.
• First-time homebuyers hit an all-time high median household income ($97,000 in 2023).

Home buying is being put off. People need more time to pull higher incomes to save for down payments and home ownership costs. Given these statistics, investors have a prime opportunity to appeal to these stalled first-time buyers.

What Do First-Time Homebuyers Want, Anyway?

Wait, you might say – I’m not selling my rental properties. Why should it matter what homebuyers want? It’s simple. Your rental residents are increasingly likely to be among the many households delaying – often involuntarily – homeownership. Though renting is an increasingly viable, long-term option, there’s still a strong drive to reach that “American Dream” milestone of buying a house.

Investors can’t rely on unaffordability and inventory challenges to keep their residents “off the market.” You’re competing with the dream of homeownership. When you know what people want in the homes they buy for themselves, you gain insight into how a rental property can match – and even exceed – those expectations.

Further Reading: Here’s What Rental Residents REALLY Want from SFRs

First-time homebuyers generally have a unique set of priorities that shape their homebuying decisions. Here are some of the key factors they typically prioritize:

#1 – Affordability

Affordability is an increasingly elusive quality. First-time buyers often prioritize properties within a strict budget, even if lenders have approved them for more. Access to favorable financing terms, such as low down payments or assistance programs, is also essential, as many are still building their savings. While many still hope to abide by the 30% rule, housing costs take an increasing share of household income.

#2 – Location

Renting or buying, everyone wants convenient commutes to work, public transit access, and proximity to schools, shops, healthcare, and entertainment options. Safety, walkability, and community feel are other critical factors.

Where you invest – down to the neighborhood you buy in – matters. A great property in a bad location isn’t so great anymore.

#3 – Size and Layout

Homebuyers think long-term. While they want a home to fit their current lifestyle, future needs, such as starting a family or working from home, are also crucial. Functional spaces like open-concept layouts, ample storage, and flex rooms for a home office or future nursery are popular features.

Investors, think long-term with your properties, too. If you want to retain great residents, think about what they want and need now and in the future. You’ll avoid losing them just because they’ve outgrown your property.

#4 – Move-In Ready Condition

First-time buyers often lack the budget or experience to handle significant renovations. This is why new construction properties are particularly appealing to them. Don’t underestimate the power of esthetics and a short to-do list. Modern kitchens, bathrooms, and energy-efficient appliances reduce upfront costs and make the home feel more “move-in ready” – not just for buying but renting, too.

#5 – Low Maintenance Requirements

First-time buyers often want a home that’s easy to maintain, especially if they have busy lives or lack experience with property upkeep. This is why an HOA is a plus, not a minus, for some! People are sometimes willing to eat an extra cost for convenience.

What Else Can Rental Properties Offer?

Financial Flexibility

• Lower Upfront Costs – Renting requires a smaller initial investment (typically just a security deposit and first month’s rent) than a down payment and closing costs.
• No Maintenance Costs – Rental residents aren’t responsible for repairs or maintenance, which can save them from unexpected expenses, like faulty appliances or HVAC issues.
• Fixed Monthly Costs – Renting comes with predictable housing costs. Homeowners, though, face potential fluctuations in property taxes, insurance premiums, and maintenance expenses.

Mobility and Agility

• Easier to Move – Renting allows for greater freedom to move without the complications of selling a property. This flexibility is attractive for those who may change jobs, study in different cities, or want the option to relocate.

• Shorter Commitment – While owners obviously want residents to renew, the lease terms provide a necessary “out” for everyone.

Insulation from Market Risk

• Housing Market Insulation – Renters are unaffected by fluctuations in property values. They don’t have to deal with losses during a market downturn. Don’t get us wrong – real estate is the best investment you can make. But a personal home isn’t really an investment, and shifting values can create stress!
• Less Financial Pressure – Without the burden of a mortgage, property taxes, and homeowners insurance, people may find it easier to manage their budget – leading to more avenues to save and invest.

Believe it or not, rental properties can compete with the dream of homeownership if managed well. Don’t miss out on the opportunity to succeed as an SFR investor!

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