New Kids on the Block: How Gen Z are getting into real estate
As they enter adulthood, more Gen Z-ers are buying real estate. Here are some trends they’re following as they buy property and become young homeowners.
As millennials become more mature adults, a new generation is taking over as the newest entry to the housing market. Those born between 1997 and 2012 are known as Generation Z, and they’re already slowly becoming a financial force to be reckoned with. 2% of new homeowners are from this generation, and while that might not seem like a lot, that number is sure to grow as more of them find ways to invest in real estate.
This younger generation is buying up property at the same pace as the silent generation, who were born almost 100 years ago. At this rate, they are on track to overtake millennials in the real estate market, which makes catering to these young, tech-savvy clients of utmost importance.
However, don’t expect your usual tricks of the trade to work on these kids. With a wealth of information in the palm of their hand from the moment they were born, the well-informed and always-online generation is playing by a new set of rules. Their needs, wants and demands in properties are much different from past generations.
If you want to keep up with the times and find new clients in this promising generation, you have to know what they care about.
Here are some of the most significant trends in Gen Z real estate investment:
1. Their biggest concern is space
Gen Z is known to be a penny-pinching and cost-effective bunch. They will compromise on anything as long as it brings down the cost of what they’re buying. Turns out, it’s almost the same in real estate. While things like location, amenities and luxury finishes aren’t priorities and are things they’re willing to sacrifice to save a buck, there’s one thing they will not compromise: space.
One of the reasons why Gen Z has been buying in more rural areas is because the properties there offer more space than in tightly-packed cities. They would rather buy a big, empty unit in the suburbs than a claustrophobic apartment in the middle of the city.
This can be attributed to wanting a customizable space, and the popularity of open floor plan properties. When Gen Z buys a property, they want to make the space their own. They’re not necessarily looking for complete units to invest in, but big spaces for them to play around with.
Other than space, their preferences in properties vary wildly. Some recent trends, however, point to communal areas as a key way to draw Gen Z in. Properties near parks or with a shared co-working space are becoming more popular with the younger crowd to satisfy their need for socialization.
2. Gen Z buys cautiously
Their age might mean they don’t have the life experiences some mature investors have, but don’t be fooled. Gen Z is careful and knowledgeable with their spending, especially with their real estate investments. This generation is known for being thrifty and love a good deal, which means they won’t settle for the rates they’re presented with when lower rates could exist.
This trend can be attributed to how easy it is to find deals nowadays. While the traditional real estate practice can take weeks or even months to scout for the best real estate deal, these Gen Z kids can do all that research and more with their smartphones in a matter of minutes. When the entire housing market is online and Google-able, finding a good deal becomes more convenient and easier.
Another reason they’re cautious with buying is how financially knowledgeable they are for their age. Not only can they search up anything they need to know, but social media bombards them with information that they absorb and apply to real life.
Lastly, they’ve had to face multiple financial crises in their short lives. They know the value of the dollar. While they do have disposable income in their hands, they know better than to waste it. Dealing with these young investors isn’t much different from dealing with their older, more experienced counterparts nowadays.
However, Gen Z can still struggle with the complex world of real estate investing. Smart Capital Center is a service that makes it easier for them and their brokers to find the best loan options for them to take. With the struggle of dealing with student debt, it would be best to find an understanding lender that can work around all your constraints.
3. Everything revolves around their community
Gen Z are a communal bunch of young people, and it shows in their real estate investing behavior. Whether connected online or with their neighbors, they find a way to reach out and help or be helped by a community they identify with, and this affects their investing in two ways: how they get their information, and where they decide to invest.
We’ve established that Gen Z are well-researched and use the power of the internet to make intelligent decisions, but they use more than Google to get information. Through their peers on social media, they get advice from others about their investment opportunities and share that advice after they achieve success.
They don’t see knowledge as a means to get ahead of their peers. They share their knowledge and experience with openness and transparency, because they’ve also gotten their advice from other people. This “pay it forward” mentality helps them democratize investing. They’re bringing other people along for the ride. Inclusivity is in with these kids.
The other way they engage their communities is with their neighbors around them. Location and luxuries take a back seat to the people they cohabit with. Communities with friendly neighbors and lots of shared spaces are attractive to these young investors.
4. They’re buying early and cheap
While it’s true that these fresh and young investors don’t have a lot of money saved up like the older homeowners, they’re still buying property. They might still be troubled by student debt, but Gen Z would rather face that expense and invest in property to start creating wealth for the future.
One of the ways they can afford to buy property without spending a lot of money is by buying less expensive properties in lesser-known cities around the country. The properties might not be in the center of the action, but Gen Z-ers are able to own and potentially turn a profit at only a fraction of the cost it would take to buy apartments or homes in city centers.
This shift can be attributed to many things. The generation is thrifty and uses their knowledge of cheap living to their advantage. They’re okay with buying a fixer-upper apartment as long as it’s within their price range. The popular digital nomad lifestyle can also explain their aversion to premium properties in urban areas, as prospective tenants don’t need to be in the city centers to work.
Practical and stable living is a must for these young investors. They grew up watching celebrities live lavish lifestyles through social media, but it has also made them more informed about the realities of life. In a world where everyone is online, all kinds of lifestyles are broadcast over social media as well. Aiming for a stable, middle-class lifestyle isn’t too far-fetched for Gen Z. Instead of shooting for the stars, they value building wealth from the ground up, which means they buy cheaper properties.
5. Making the most of investments by sharing
The new generation has come up with plenty of new and creative ways to invest to make sure they can make their money grow, despite not having a lot of capital to begin with. These Gen Z investors grew up with the popular “shared economy”, so one of the most common ways to invest nowadays is through sharing your investments with your peers.
By pulling together to make investment groups, it’s becoming cheaper for investors to start buying property and earning. Despite not being as lucrative as owning your own investment, this early start allows them to invest earlier and build their way up. Even crowdfunding has become a popular way to invest, with buy-ins being as low as $500.
Other than sharing investments, plenty of Gen Z property owners are into shared spaces as well. By zoning their properties carefully, their residential space can be shared with budding businesses. This saves on living costs, and could even allow them to earn from the venture. This shared space concept showcases how flexible and innovative these young investors can be.
Another common way Gen Z shares their resources for their gain is by house-hacking. These investors buy multi-family properties, live in one of the units and rent out the others. With proper planning and strategy, you can not only cover your mortgage with the rent you charge, but you could even earn just by letting others share your resources. Think of it as the starting point of becoming a landlord.
How brokers can help Gen Z invest in real estate
With all these Gen Z trends starting to change the real estate landscape, brokers need to tailor their services to make sure they can satisfy the needs of these young investors.
One of the most important changes is to make sure you create inclusive investment opportunities. These Gen Z kids are going into the market without a lot of stable income and savings yet, but are looking to start investing early. If you can’t cater to these small-scale investments, then they can just Google another broker that would take their business.
Another way to find these Gen Z clients is to be present on social media. Just being present on Google searches isn’t going to cut it anymore. If you’re the broker giving them good financial and real estate advice on TikTok, then they would be more willing to trust you when they become ready to enter the real estate investment industry.
Lastly, don’t underestimate these new investors. They might only be taking their first steps into investing, but they’re already equipped with a vast amount of knowledge. They know what they want and they are ambitious. They are very creative and intuitive, so treat them the way you would investors with years of experience.
Smart Capital Center helps Gen Z and their brokers to invest
Google research and social media can only take these young investors so far. They need all the support they can get before they dive into the real estate investment industry. To better connect Gen Z with the right financing in their investment journey, Smart Capital Center makes it easier for them to find the right properties and lenders that can help them secure their dream properties.
With Smart Capital Center’s AI technology from SpaceQuant, brokers can provide independent market analyses and valuation reports to potential lenders, to be able to present Gen Z investors with the best possible rates. SCC takes care of the legwork so that you can focus on investing and managing your real estate portfolio. Call us at +1 (866) 725 – 0555 or send an email to firstname.lastname@example.org to get started on a better and quicker real estate investment journey.
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