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Real Estate Investing – Millennials’ Route to a Comfortable Retirement

According to CNBC – from an article entitled “More than half of millennials think they’ll be millionaires –here’s what the data suggests” – there may be a grim financial future for millennials who have delayed the average age by which they build wealth to the age of 36.

The article cites a report from the Brookings Institution, covered by The Economist, which states that millennials are 25% less wealthy than “similarly aged households in 2007”:

Median wealth among millennials in 2016 was lower than among similarly aged cohorts in any year from 1989 to 2007,” when the Great Recession hit, the report says. “Median wealth among millennials was about 25% lower in 2016 than among similarly-aged households in 2007

Why millennials are dropping the ball on saving, investing, and retirement

This and other articles cite these reasons for why millennials are “dropping the ball.”

  1. More debt – Because the millennial generation is one of the most formally educated, it has the disadvantage of dealing with the debt associated with higher education.
  2. They are funding their own retirement – Whereas generations before have had employers that have provided pension plans, 401(k)s, and other forms of benefits and protections, millennials are dealing with different types of employment situations that do not offer those benefits.
  3. They entered the workforce during the time of the Great Recession – On average, the data suggests that millennials are distrustful of the U.S. financial system and the stock market. (Which is why we are suggesting real estate investing!)
  4. The workforce is changing and “work” is different now – Thought work, as opposed to physical labor, is becoming more prevalent in the Digital Age, where remote work is becoming more and more viable. Workers may not want to quit working when it is “time.” And millennials may not plan on retiring, in the old sense of the word.

Why We Suggest Investing in Real Estate

Real estate offers a more tangible way to invest, and therefore can dispel distrust of investing.

With a delay in savings and investing, it would seem – logically speaking – that a delayed retirement would be on the horizon. That’s not necessarily the case.

Real estate can create ROI much faster and predictably than other types of investments.

Here are the reasons that Gary Keller gives in The Millionaire Real Estate Investor for why investing is the most advantageous form of investment.

My point here is that all of these points are things that are self-evident due to the tangibility of the property. You cannot do this stuff with stock, and that’s why 90% of millionaires invest in real estate.

And with all this ability to go up, touch, interact and change your investment property, it sure would be hard to distrust the value.

NOTE: Check out Entrepreneur’s “8 Proven Ways to Make Money in Real Estate” for ideas of how to get your investing going.

 

#1: Real estate properties are improvable.

The #1 reason why millennials can trust in their real estate investments is their ability to improve and renovate their investment property.

In most forms of investment, you rarely get to change anything about what you’re investing in, but, with real estate (real or digital), you can literally change it so it has more value.

This is often referred to as your “sweat equity” – a measure of how much your hard work improves the value of a property or home.

Add another half-bath here, a garage, a storage building, landscaping – these give you nice little bumps in your ROI.

 

#2: Real estate investments are accessible and leverable.

Because there is such confidence in the value of real estate, it is often easy to finance. A lien is easy to get from lenders when it is on a piece of property.

(The reason? Well, read the other 5 reasons listed here)

 

#3: Real estate is predictably appreciable.

If you set down with a mortgage broker or banker, they can give you figures on how much equity your home is most likely to gain in the following years.

How? In real estate, value is often determined by an ecosystem of factors. First, the value of your land appreciates because there’s a limited supply (no more land is being created around your town if you can believe that). And part of the appreciation of the land is what goes on around it.

Imagine that your Great Aunt, long lost, left you property she bought for $150,000, but it is now worth $500,000 because of the urban growth in her neighborhood. A property’s location figures into the value calculation because of the value of being near all the things it is near.

Because these factors are predictable, the value and its appreciation are predictable.

Note: you can read more about the determination of home value here on Investopedia.

 

#4: You can rent it out!

With the technological boom we’re seeing, there are a lot more ways to monetize your real estate property.

Think about it. There’s Airbnb, VRBO, Tripping – a bunch!

You can go the traditional route of leasing your property to tenants, but you can also earn cash flow from renting your properties like a business.

 

#5: Real estate value is stable.

Historically, the standard deviation for real estate has been 4% while the stock market has been 16%, according to Gary Keller.

That means, the value of real estate does not have as much volatility as the stock market, allowing for more confidence.

 

Would you like to talk about real estate investing with a real estate agent? Gail Day would love to speak with you!