Why Targeting Millennial Real Estate Customers Makes Sense

"Don't find customers for your products, find products for your customers.” ~ Seth Godin

As a small business owner or self-employed professional, you already understand the importance of creating products that serve a specific need of your target audience. While this strategy is highly effective for any professional service or product, could the same be applied to real estate investing?

The answer is yes, and it could actually do wonders for you. Being a small business owner, creating multiple streams of income is crucial for the initial period, and an extra income source never hurts anyone. If you own a self-directed IRA or Solo 401k account, adding real estate to your investment portfolio could not only offer handsome returns, but it could add some stability to a stock or mutual fund dominated portfolio. The IRS allows real estate investing through qualified retirement plans such as,Checkbook Solo 401k and self directedIRA plans.

Planning to Invest in Rental Properties, Target Millennials

That being said, it is important to define a target renter or buyer audience for your real estate investments. If you are aiming for rental income, millennials should be on your priority list. Here are some quick facts about millennials:

• Largest generation in the US History: According to Goldman Sachs’ millennials data, it is the largest generation in the US history, comprising of 92 million millennials born between 1980 and 2000. Further, as many as 60% of the older millennials, aged 25 to 34 years, were living in rental accommodation in 2013 against 52% in 2005.
• Make up 32% of all home sales: Numerous studies have pointed out that millennials are slow to buy homes and prefer renting in urban areas or closer to their workplace. At the same time, it is important to consider that 32% of all home purchases in the U.S. are made by millennial homeowners.
• Account for 51% of the renter population in the US: According to the National Multifamily Housing Council, millennials, under 30 years of age, accounted for 51% of the total renters in the U.S., followed by 23% renters in 30 to 44 year old age group.

5 Things Millennials Look Out for in a House/Rental Property

• Open floor plans: Unlike the earlier generations, many millennials aren’t fond of strict floor plans, and they rather favor open floor plans with fewer walls. Considering the work culture and gatherings of the millennial generation, they often prefer a natural flow throughout the home instead of compartmentalizing them.
• Home office space replaces traditional dining room: According to an independent study done by Freelancers Union and Elance-oDesk, 53 million Americans, totaling 34% of the US workforce, engaged in one or the other form of freelancing, with 21.1 million independent full-time freelancers. Considering these figures, there is no surprise that home office is on the priority list for millennial renters/buyers. At the same time, there’s been a low demand for traditional dining rooms, as this generation eats on the go or in front of the TV.
• Energy efficiency: The millennials along with other buyers in general are moving towards energy-efficient housing, include energy-efficient cooling or heating systems. However, it is not among the top priorities in their preference list.
• Lower maintenance: With an increasingly changing work schedule, this generation is inclined towards housing with lower maintenance, and that’s probably one of the primary reasons behind the increasing demand of apartment units. For single-family houses, millennials pay close attention to the HOA maintenance services or requirements.
• Technology & Internet: These are two primary qualities that an average millennial individual or couple seeks in a housing accommodation. Smartphones play a critical role in their work, social life, and personal life, making it their top priority. Houses with an excellent cell reception and availability of internet service providers rank higher in millennials’ priority list.

Supercharge Your Retirement Portfolio with Real Estate

As discussed at the beginning, the IRS allows investing in real estate through Solo 401k and IRA plans. If you already have a Solo 401k plan, but aren’t sure about investing in real estate, here are a few reasons to start as soon as possible.

Why Add Real Estate to Your Solo 401k Portfolio?

• Real estate offers stability: Unlike the stock market, real estate properties tend to enjoy higher stability, despite the last real estate bubble burst. Some financial experts suggest having a diversified retirement portfolio, with a certain portion dedicated to real estate investments.
• Rental income: Adding rental real estate can bring another income stream, and even after considering the vacancy rate along with other expenses, a carefully researched property will add positive cash flow to your portfolio.

• Tax free capital gains: For real estate purchased with a Roth Solo 401k, you will get to keep the entire capital gains tax free, which could be an exciting tax-saving strategy for long-term real estate investments.
• Non-recourse financing: Solo 401k plans have a provision to finance real estate with non-recourse financing without extra tax charges, allowing you to invest in real estate with little money down.

With the benefits discussed above, it is important to understand that real estate investing is challenging and requires continuous efforts until you build a system. Before investing in real estate, think it through and prepare a plan, mentioning your financial goals and efforts you are willing to put in the plan.