I will be turning 50 in a couple of months and I have been a full time real estate investor for 15 years now. Real Estate investing had become pretty comfortable for me. My villa project, built for the 55+ crowd starting in 2004, had some ups and downs as I maneuvered my way through the 2008 recession, but at least I understood my buyer.
My parents were 40 years older that I was so I have always got along well with those much older than me. I also understood those of my own age group as buyers or renters; what they wanted and needed. Lately though, I have been out of my element as I attempt to build, renovate or rent to the current under 35 crowd. It is different. The old rules no longer apply.
Let me first say that nothing I will say here is a judgement on this group, neither good nor bad. I will talk only about my own personal observations of how they are different than those that went before and how you will have to up your game in the coming years. None of that, “Damn kids, get off of my lawn” here.
As a Boomer or a Gen-Xer our generations have, in general, been fairly successful economically. Over the years we have traded up to larger and larger and nicer and nicer homes. However, again in general, most of us still remember the more humble homes we grew up in. So, while we appreciate the finer things in life we don’t necessarily expect it. Our children, in contrast, have grown up in some fairly nice surroundings and as they move out into their first home or rental property the expectations are higher.
More than once I have been showing a prospective 20 something tenant and heard, “I require more natural lighting in my home,” or “I like the interior but I require a more modern look on the exterior.” Your finishing quality will have to be a little bit better going forward. What was good enough before will not be enough now.
I just finished a condo conversion project, renovating an apartment building built in 1974. We setup a show suite while still conducting work on the rest of the building – including the exterior stucco, parking lot and landscaping. While there was always a segment of the population that wouldn’t buy or rent until a project was completely done; I never really had an issue before selling partially completed projects. No so this time. I really noticed a change in the expectation level of the younger buyer. Everything really had to be perfect and complete.
We are also seeing the younger generation remain in their parent’s home longer before moving out. I moved out nine days after I graduated high school. Not for any bad reason, I was just so excited to begin the next chapter of my life. As investors we need to be aware of this and get used to seeing more mature first time renters or buyers entering the market. Perhaps in their mid to late 20’s as opposed to their early 20’s as we saw before. I have noticed this myself over the past couple of years.
My own kids, aged 17, 18 and 19 have no interest in learning to drive. I had my learner’s permit the day I turned 14 and my driver’s license the day I turned 16. I couldn’t wait and was counting down the days prior to my birthday. My son was nonchalant about the whole thing and finally got his learners at 15 and his drivers at 17. My two daughters have neither their learners nor drivers. They couldn’t care less.
Statistics tell us this is quite common. As a result, the new generation tend to use transit more and will want to live closer to their work. I read a study the other day stating that Millennials are willing to pay more to live closer to their work and avoid the commute that my generation had no problem with. Several observations spring from that: a) I see the demise of the suburb in years to come as we see a move back to the inner city, 2) I see more apartment towers built as opposed to individual homes and, 3) we will see more ‘pods’ where residences, work areas and recreation areas are built all together.
Real estate investors should be looking to deal with properties that are a) closer to mass transit stations (within walking distance preferably), closer to universities, closer to downtown and closer to larger highways / arteries (anything to cut down that commute time).
Parking was always a really big deal with cities whenever I planned developments before. There was always at least a 1:1 or maybe even a 1:1.1 ratio of suites to parking stalls in an apartment or condo building. The new generation has fewer cars. Maybe a single person won’t have a car at all or maybe a couple will only have 1 vehicle. Instead, they use transit or bike or use these small smart cars that rent by the hour. This is different than before when every person seemingly had their own vehicle.
This will lead to developments in the future not needing as many parking stalls. I am already starting to see municipalities back off on the stringent requirements of the past. Inside your apartment buildings you should start to provide storage space for bicycles and use this as part of your marketing.
I will admit, I am old school and the last couple of years I have got caught with my pants down a bit. I have lost some potential renters or sales because I hadn’t given enough thought to this new younger demographic. They say, “It is a brave new world.” We have a couple of choices, either adapt or continue to just target the Gen-X and Boomer generations.
Each development / renovation / conversion is different, with a different target market. Just make sure that if you do want to target this younger generation that you do take the time to research and investigate what their wants and needs are and what makes them different.