There is a big difference between living where you live and owning where you don’t. According to Gary Beasley, co-founder of Roofstock, an online platform that buys/sells properties as single-family rentals in midsize emerging markets such as Memphis and Pittsburg, “The idea of separating where you live and where you own has been happening for a while now. Since we’ve created the real estate investment cloud, you can plug into it and access opportunities around the country.”
Roofstock has been capitalizing on some larger real estate trends to the tune of $1.6B in transactions since its founding in 2015. Some of these trends include
- rising housing costs in coastal cities
- the increasing appeal of midsize metros
- a growing interest in the idea of “passive income”
- the cult of FIRE (Financial Independence Retire Early)
- a growing cynicism concerning investment markets
- growing concerns about the long-term fate of social security
As a result of these confluent trends and realities, Millennials are increasingly buying and managing properties “from afar” since buying a home for the family where they live and work is not an option. One such Millennial investor told Curbed’s Patrick Sisson that even if he could afford to buy a single-family house where he lives in the Bay Area, he’s uncertain buying such a house would be worth the financial risk, especially if there is a downturn in the economy.
“We find that Millennials see the investment landscape very differently than their parents,” said Alan Lewis, co-founder of The Diversify Fund, an online platform that lets people invest in large-scale multi-family developments. “(Millennials) are jaded by the home buying story…they’ve seen people overpay during the peak and be upside-down in their houses…they see stock volatility and don’t have an appetite for it. They want something that offers a departure from the rollercoaster ride.”
A common goal among Millennial investors in single-family rental homes is to have enough passive income to provide for their families and to be able to work IF they choose to, NOT because they need to.
That common goal feeds into investing in smaller markets. According to Riley Adams of the Young and Invested Financial blog, smaller markets are about rental income, cash flow and consistent returns over time. Major markets are about making money vis a vis home price appreciation.
Prior to this era of innovation and the real estate investment cloud, 70% of all rental investment properties were located one hour or less from where the owner lived. Today, 93% of Roofstock’s investors are buying investment properties out-of-state from where they live. 75% of those investors are first-time buyers.
Amiad Soto, co-founder of Guesty, one of the world’s largest property management platforms, “Real estate is becoming more of a business, instead of something’s that’s fixed. This is enabling a lot more small-medium sized businesses to flourish and for self-made entrepreneurs to grow.”
Thanks to Curbed’s Patrick Sisson for source data.