As the next generation of investors rises, it seems like they’re weighing more options than ever. It’s not so surprising to us, however, to learn that more investors are choosing to invest in real estate. According to Gallup data, roughly two-thirds of Americans had money in the stock market in 2007. By 2016, that figure had fallen by half.
Instead, investors are viewing real estate as the next great investment. Fannie Mae reports that 85% of millennials see real estate as a good investment, while another study reports that 55% want to or already are investing in real estate.
As turnkey real estate providers, we know that real estate makes a great investment. We have the years of experience to know it firsthand. But when it comes to new investors who are choosing to invest for the first time...what tips them over? Why are they picking real estate over everything else?
Here are the reasons why the next generation of investors are choosing real estate. And who knows—it might be why you choose real estate, too.
4 Reasons Investing In Real Estate is Attractive to Young Investors
It Feels Real
Real estate is one of the few investments that is tangible. It can be seen, visited, and touched. There aren’t many other investments you can say that for! And with that tangibility comes an undeniable feeling of security. Because real estate is a real asset (in contrast to financial and intangible assets) it has an intrinsic value, which makes it a more stable investment that is subject to more predictable “rules” than other assets.
For buy-and-hold investors looking to be in real estate for the long haul, even the market fluctuations that do come with the territory aren’t often a cause for major concern. Because of the cyclical, resilient, and often predictable nature of the market, most investors know what to expect and aren’t caught by too many surprises.
Greater Control of Outcomes
When dealing with the stock market, it usually doesn’t feel unlike a gamble. You throw your money in and hope for the best. Sometimes it pays out, and sometimes it doesn’t. In fact, a lot of investments that rely on other people handling your money can feel that way. What are they really doing with it? Where is it going? Is it going to pay out for you in the end?
A lot of people are uncomfortable with that lack of control. When it comes to real estate investment, you don’t have to worry about it. In fact, it’s probably the most self-directed investment you can choose. You’re your own boss—deciding where you money goes, exactly how to invest it, and reaping the full rewards for your labor. There’s something that a lot of people find rewarding about being engaged in the real estate investment process, and we can’t blame them!
For passive buy-and-hold investors, investing in single-family real estate is one of the best ways to not only save for retirement, but to scale and grow your investments. You’re not just pitching in to a single investment and waiting for the right time for it to appreciate so you can sell—because you’re renting, you’re earning money each and every month while also benefiting from appreciation.
The immediate reward that comes with rental properties is extremely attractive, particularly for cash-strapped millennials who are known for the generation suffering through a tough job market and wage stagnation.
Lastly, there’s one huge advantage that real estate has: leverage. It’s the ability to use borrowed capital to increase your potential return on investment or increase your net worth. If you’ve applied for a mortgage, you’ve tried to gain leverage. When you put a down payment on a property and the bank takes care of the rest, it’s leverage in action.
There are lots of ways to access leverage beyond that of a standard bank loan—private money lenders, partnerships, and even seller financing. Regardless, this feature of real estate investment is wildly beneficial and not something that is readily available for other kinds of investments.
For young investors, real estate investment offers a sense of financial security and hope for the future. Combined with the expertise and knowledge of turnkey partners who know the business and invest in your success, it’s even more secure.
If you’ve considered investing in real estate...why are you still waiting?