3 Reasons Millennials are (Surprisingly) Sold on Real Estate Investing

Ever since the term “Millennial” entered the lexicon to describe those born between 1980 and 2000, much has been made of the generation’s unique preferences whether as consumers, travelers, citizens, children, parents, or homebuyers… or as the case often has it, home renters.

Millennials’ affinity for renting their primary residences, rather than buying homes, is well-documented: Estimates vary, but only 24-36 percent of U.S. millennials today are homeowners (compared to approximately 64 percent of the U.S. population). Countless reports and studies have assessed the present and future impact of their slowed interest in home-buying. Investors and executives have wondered (and worried) about how millennials’ differences from prior generations, especially on the real estate front, will shape both the commercial and residential markets in the years to come.

But recently, an interesting new trend has made its way into the larger ‘Millennials & Real Estate’ discussion. The New York Times recently reported on the generation’s interest in real estate investing – particularly in buying single-family rental properties.

Granted, the Times article wasn’t backed up by any hard numbers on Millennial investment activity (and the publication has a bit of a reputation for treating anecdotes as trends). But there are several very sound reasons Millennials would be drawn to investing in real estate without biting the home-buying bullet.

1. The benefits of ownership without the drawbacks of commitment

As any homeowner knows, buying real estate creates tax advantages and enables investors to build equity – which create obvious benefits for younger Americans seeking to bolster their financial stability. But Millennials have a known affinity for bouncing from job to job, city to city, apartment to apartment, and traditional home ownership doesn’t align with their priorities.

Investing, however, does. Purchasing rental homes or making passive, small-dollar investments through real estate crowdfunding are ways for Millennials to win the benefits of buying (and the additional incentive of consistent cash flow and income) without committing to settle down in a single location.

2. They lived through the Recession (and know who the winners were)

As Pew Research has reported, Millennials are the first generation in the modern era to have higher levels of student loan debt, poverty and unemployment – and lower levels of wealth and personal income – than both their immediate predecessor generations had at the same stage of their life cycles. Having lived through the Great Recession at a pivotal point in their lives, they’re distrustful of financial institutions and interested in forging their own, less traditional paths.

But they’re also very smart, and know they need to protect themselves from the kind of financial trouble that hurt their parents’ retirement plans and long-term stability. An interest in owning rental real estate is an obvious extension of that: They know who benefits from the rent checks they send in every month, and they want to strike out to earn some of that action themselves.

3. They know what “diversification” is – and understand its value

The financial markets are, of course, complex – and so are the factors that led to the late-200s economic meltdown. But with even a cursory level of exposure to the issues and events surrounding the crash of the housing bubble, Millennials can recognize the lessons we all hard to learn the hard way: Don’t rely on the value of your home to go up indefinitely. Don’t over-extend yourself on real estate you can’t afford. Don’t rely on one asset or investment avenue to support your financial future.

And that’s the ultimate lesson: Diversify your portfolio. Given those aforementioned rent checks they’re writing each month, Millennials know there’s value in owning real estate – but knowing the past, they know not to consider homeownership the ultimate ‘American Dream’ goal and financial must-do that it once was.

Millennials may not be allocating their assets perfectly, but they know real estate is just one piece of the financial puzzle. That’s one reason especially why crowdfunding, which offers the long-term benefits of cash flow at investment minimums as low as $1,000-$5,000, is so valuable to Millennials: It gives them the ability to capitalize on the long-term potential of real estate without a high-dollar commitment – leaving them plenty of money to plug elsewhere, so no crash could ever take them down.

Browse EarlyShares to find your next real estate investment now.

The Early Five from January 29,2016

The EarlyFive from Friday January 29, 2016

What a week—blizzards up north, storms down south, stocks swinging every which way, and the antics of the presidential debate have dominated our discussions. In all the hype, commercial real estate remains smooth and steady; a welcome escape from the daily news cycle.

Crowdfunding continues to play an increasingly important role in the commercial real estate ecosystem. See below, to learn about our sister company Property.com, our partnership with CFX for secondary market sales, and the generally sunny forecast for Commercial Real Estate in 2016.

See below for latest EarlyShares news:

The Future of Crowdfunding. The Crowdfunding world is changing fast. on blog.earlyshares.com

January 25, 2016
The Future of Crowdfunding. The Crowdfunding world is changing fast.
By Adam Fridman, Inc. 

This article not only offers insight into how Crowdfunding got started, but also where it’s headed. Platforms like our sister company Property.com are leading the way in aggregating the deals for the industry and providing tools for investors to find, select and invest in the right deals for them.

Real Estate Crowdfunding Platform EarlyShares Joins CFX MarketsJanuary 26, 2016
Real Estate Crowdfunding Platform EarlyShares Joins CFX Markets
By Samantha Hurst, Crowdfund Insider

Exciting things are happening at EarlyShares, including our addition to the CFX Markets, which means increased liquidity and opportunities for our investors.

Despite Market Volatility, 2016 Will Be A Great Year For Commercial Real Estate, Expert SaysJanuary 26, 2016
Despite Market Volatility, 2016 Will Be A Great Year For Commercial Real state, Expert Says
By Ryan Boysen, Bisnow

Although the stock markets were turbulent last week, real estate investments remained steady, another reason foreign investors continue to view U.S. real estate as a safe investment.

Global Direct Investment Totals Over $700 Billion in 2015January 21, 2016
Global Direct Investment Totals Over $700 Billion in 2015
By Michael Gerrity, NERIonline

A recent report from JLL shows that real estate was a key driver of economic growth in established and emerging cities around the world. Other key trends reported indicate that the market is on track to average $1 trillion per year by the 2020’s.

How Presidential Candidates Stack Up on Tax ReformJanuary 21, 2016
How Presidential Candidates Stack Up on Tax Reform
By David H Lenok, NREIonline

Among the many things voters need to know about the Presidential candidates is how their tax reform will affect estate, gift and and capital gains taxes. This slideshow lays out each one’s plan in clear-cut terms.

5 Key Considerations in Real Estate Crowdfunding Investments

Thanks to new regulations, a resurgent commercial real estate (CRE) market, and renewed interest among investors in accessing opportunities beyond the stock market, the real estate crowdfunding industry is seeing skyrocketing growth. With a wealth of online investment platforms on the market and a wide variety of assets and deal types available, it’s easier than ever for investors to access high-potential deals for low investment minimums.

Yet given that the online real estate investing market at large is still only about three-and-a-half years old, it’s wise for investors to be careful when it comes to capitalizing on crowdfunding. As with all forms of investing, real estate crowdfunding involves risks – and those risks are enhanced significantly when investors neglect to do their research. Before making your first ‘crowd’ CRE investment, consider each of the following factors.  

Platform: According to recent estimates, there are more than 120 real estate crowdfunding platforms currently active in the space – and they’re not all created equal. Not only do platforms vary widely in terms of property types and deal structures offered, they also differ exponentially in terms of experience. The onus is on the individual investor to assess which crowdfunding portals best match their preferences and interests. Yet due to the complexity of the crowdfunding regulations and the rapidly evolving nature of the market, it’s wise to trust early entrants in the online investing space over late-to-the-scene newcomers.

Sponsor: Each real estate crowdfunding platform has its own approach to offering selection, and some are pickier than others. Yet no matter how selective the investment portal may be, the deal sponsor – be it the property developer, owner-operator, or firm responsible for the property’s acquisition and redevelopment – is the entity responsible for the ultimate success or failure of the deal. Review and research each sponsor’s expertise, portfolio, and track record prior to investing, and make sure you’re comfortable with their ability to execute on the opportunity as presented.

Due Diligence: Due diligence is a twofold consideration when it comes to real estate crowdfunding because it involves two (equally important) aspects: platform due diligence and investor due diligence. If the platform you choose to work with vets its deals carefully, then it should make its deal-assessment documents available to investors in a transparent way. Whether or not the platform performs extensive vetting, however, investors should perform their own analysis on each offering to determine whether the investment terms, projections, and other details align with their goals and expectations.

Fees: Given the variety of platforms in the real estate crowdfunding space and the relative infancy of the market at large, there’s no ‘standard’ pricing model across the industry. Some platforms underwrite each deal and take a cut of the returns for themselves; some charge flat-rate prices to sponsors in exchange for posting offerings on their sites; and still others charge investors small fees on each investment. None of those approaches is wrong, per se – but investors should know which is being taken on each deal they invest in. Make sure any investment fees are clear to you before you commit your funds.

Portfolio Diversification: Especially if your investment portfolio is comprised primarily of stocks, bonds, and cash, diversifying into alternative assets like commercial real estate is a wise decision. But it’s important to consider the risk-reward profile of each new investment (crowdfunding or otherwise) and assess how an opportunity fits in among your current allocations. A well-balanced portfolio should be every investor’s goal, so consider making a variety of crowdfunding investments in different deal types – with different risk profiles, at varying investment thresholds you’re comfortable with – to ensure that both your overall portfolio and your commercial real estate holdings are sufficiently diversified.

The EarlyFive from Friday January 22, 2016

If you’re tired of the swings in the stock market (I know I am!), now is a great time to re-evaluate your allocation to commercial real estate with an investment in a transaction found on EarlyShares.

Learn how to diversify your portfolio and about commercial real estate investing in general in our Education Center.

We are pleased to announce that the Raleigh Colonnade Equity Investment Office offering has reached its $10.2 million funding target and is no longer accepting new investments.

Check out the latest EarlyShares news:

 

The EarlyFive from Friday January 22, 2016 on blog.earlyshares.com

January 20, 2016

Welcome to Asset Class: Understanding 4 Different CRE Investment Types

EarlyShares Blog

Because we understand that information on Commercial Real Estate investing is not as easy to come by as other investment sectors, we strive to provide useful tips and information as often as possible. This article will help you understand the different CRE Investment types.

Commercial Real Estate in 2016 Six Trends on  blog.earlyshares.com

January 14, 2016

Commercial Real Estate in 2016: Six Trends

By David J. Lynn, Ph. D and Peter Burley, NREIonline

A continued low unemployment rate, demographic shifts and other aspects indicate exceptional opportunities for commercial real estate investors in 2016.

The Fabulous Real Estate of David Bowie

January 15, 2016

The Fabulous Real Estate of David Bowie

By Kelechi Aharanwa, Bisnow

David Bowie passed away last week, leaving us with a legacy of hits to remember him by. He also accumulated a collection of properties, leaving behind an incredible real estate portfolio including a hideaway on a private island.

3 Reasons Warren Buffett is So Successful—and how you can be, too

January 18, 2016

3 Reasons Warren Buffett is So Successful—and how you can be, too

By Matthew Frankel, The Motley Fool

This household name is synonymous with investing and to many, he’s the greatest investor of all time. So what does Warren Buffett do differently and how can we learn from his success?

Our own Heather Schwartz received the CREW Impact Award

January 12, 2016

Our own Heather Schwartz received the CREW Impact Award

Commercial Property Executive

In this video, our Co-Founder Heather Schwarz, who was honored with the CREW Impact Award, shares her insight into what is takes to be an effective leader.

Welcome to Asset Class: Understanding 4 Different CRE Investment Types

When pursuing introductory information on real estate investing, it’s easy to be inundated with advice from the residential sector: daytime TV tips on raising your home’s value; seminars on making money with ‘fix-and-flips’; or articles on how to buy and rent out a second home.

Starter information on investing in the commercial real estate (CRE) space, however, can be hard to come by. That’s unfortunate for a lot of reasons – not the least of which being that CRE investing can involve far less effort and up-front expense than renovating houses or playing landlord with income properties.

Passive, direct commercial real estate investments through “real estate crowdfunding” offer the benefits of ongoing cash flow and paying tenants without the challenges of hands-on property management. Investors can access deals at far lower investment thresholds than required to buy an entire property (since they’re going in with a “crowd” of fellow investors on the opportunity) and select long-term investments to earn themselves regular distributions over time. Partnering with a trusted crowdfunding platform also adds value, since the top portals in the market vet their deals carefully and work exclusively with experienced real estate sponsors.

Additionally, as the tenants of the property you invest in pay down its debt financing over time, the property appreciates in value and equity is built up in the asset – creating the opportunity for greater returns upon the property’s ultimate sale. Each of the four asset types below, in fact, offers unique benefits to fractional “crowdfunding” investors.

Retail Properties: Consumer spending totals around 70 percent of gross domestic product in the United States – and despite the rise of ecommerce, much of that spending happens in brick-and-mortar retail establishments. Since retail tenants typically sign long-term leases and maintain their spaces with little involvement from ownership, retail properties can offer investors strong cash flow with low operating expenses.

Industrial Properties: The rise of ecommerce mentioned above is a friend to investors interested in industrial real estate, since online retailers of all sizes need to house their distribution operations in industrial spaces. With demand for industrial space currently on the upswing, owners in the sector are also in a great negotiating position with current and potential tenants – helping them reap strong returns to investors.    

Multifamily Properties: Demand for rental housing grew in a big way with the late-2000s economic downturn, and it has stayed high throughout the recovery thanks to changing renter demographics and preferences. Apartment buildings and other multi-family properties benefit from high rental demand (especially in large cities), and their short lease terms and abundant value-add renovation opportunities can make it easy for owners to raise rents regularly to increase overall cash flow.

Office Properties: With our modern economy driven more strongly by healthcare, technology, internet retailing, and service-focused industries than it is by manufacturing or related sectors, office space is important to almost every company. As the U.S. economy continues to improve and companies hire more and more employees, CRE investors will continually benefit from increased interest in office space from stable, growing businesses.

On EarlyShares and its flagship brand Property.com, investors can access crowdfunding investments in retail, industrial, multifamily and office properties – as well as in hotels and other property types. Sign up now to get started!

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