Renting a place to live has long been viewed as the first step up the ladder to property ownership. After all, homeownership is the safest way to building wealth throughout the country.
If that’s the case, then why is it that more millennials are choosing to rent where they live for longer periods of time?
Exactly What Is A Millennial?
The answer to this question has a profound impact on apartment investment and multifamily property management.
But first, it’s necessary to understand the various demographic groups and what they mean for real estate investors. That’s because the life experiences and expectations of different demographic groups influence their expectations, needs, and wants.
Researchers divide demographic groups into five categories:
- Builders: +70 years old
- Baby Boomers: 51 – 69 years old
- Generation X: 36 – 50 years old
- Millennials: 18 – 35 years old
- Generation Z: 17 years and younger
How Demographic Groups Differ
Baby Boomers, Generation X, and Millennials make up about two-thirds of the population.
The above age groups aren’t strictly defined – for example, a young Generation Xer might feel more like an older Baby Boomer. But there’s no doubt that events and technology influence the way that people view themselves and the world they live in.
- Baby Boomers were born after World War II. They fought for equal rights and are known as being hard workers.
- Generation X is the first generation to not do as well as their parents. They’re known as being independent and were born during a time when divorce rates were rising and birth rates declining.
- Millennials, also known as Generation Y, were born after 2000. Baby Boomer parents raised their millennial children to believe that they could do and be anything they wanted to be.
Within the next couple of years millennials will make up the largest percentage of the population. As the largest group of prospective customers, it’s important for multifamily property managers to understand this group.
But labelling millennials can be a bit tricky.
The group is considered to have high morals and ideals, and a strong sense of a global community. At the same time, they’re sometimes considered to be narcissistic with a sense of entitlement. Millennials are also the first demographic group to grow up surrounded by technology and social media.
Why More Millennials Are Renting
Millennials, along with Baby Boomers, make up the fastest-growing group of renters in the market place.
Sometimes financial factors such as student debt and the difficulty of saving enough money to make a deposit and buy a house drive people to rent rather than buy. But changing lifestyles and investment preferences also play a major role in choosing renting over owning.
- Changing societal attitudes have removed the social ‘stigma’ of renting
- Millennials are choosing alternative investment options to homeownership, after witnessing their parents struggle through the Global Financial Crisis of 2008
- Renting allows Millennials to relocate quickly to take advantage of job opportunities in a different geographic location
- Millennials are waiting longer to marry and raise families, reducing the need for traditional single-family housing
Millennials Expect More When They Rent
Millennials are also better educated and have higher income levels than previous generations of renters. Many have careers that are associated with technology, in part because they’re the first generation to grow up with the internet.
Some of the main factors that Millennials take into consideration when deciding where to rent include:
- Walkable, urban areas with access to amenities
- Access to public transportation
- Pet friendly properties
- Secure and safe buildings with great curb appeal and clean, renovated living space
- Open floor plans, large windows, stainless steel appliances, high-end fixtures and finishes
What Do Millennials Want from Landlords?
Millennials are increasingly choosing to rent. Not because they have to, but because they want to. They are younger and make more money – and spend and invest their money differently from the way their parents did.
Because of this the demands on landlords and apartment property managers are rapidly changing as well.
Millennials use the internet for almost everything they do, and they expect their landlord and property manager to do so too. Providing tenant portals for communication and workorder requests make it much easier to attract and keep millennial tenants.
Professional property managers also understand that building trust with a tenant is a main ingredient to retaining tenants and keeping multifamily occupancy levels high.
There are five key ways to build trust with tenants:
- Following through on promises
- Making repairs in a timely manner
- Upgrading appliances, fixtures, and flooring on a routine schedule
- Keeping the property well maintained both inside and out
- Being proactive
It’s Not Only Millennials Who Expect More
As the prices for multifamily property continue to rise, demands from apartment landlords and real estate investors for a greater return on their investment also increases. Millennial tenants are sophisticated, expect customer-centric and friendly services, and have exceedingly high expectations for their property management company.
Firms that are able to grow rent rolls through the use of efficient technology and a well-trained, responsive staff will be in the best position to meet the growing demands from tenants, landlords, and real estate investors.