In 2017, it was estimated that millennials would control $7 trillion in liquid assets by 2019 as a result of family wealth transfers. Whether or not that estimate proved true, there is no doubt that millennials are a force to be reckoned with when it comes to real estate investing. Feeling the effects of the 2008 recession in their pockets has left millennials with a lack of trust towards public investments. That doesn’t mean, however, that this generation fears investing. They’re just focusing elsewhere.
The real estate market regularly outperforms the stock market by 2:1 and millennials are well aware. Coming of age during the housing crash and recession has left the generation wary of the stock market and financial institutions, favoring investments that are more tangible and stable. Such morals have led them to the world of real estate investing, which begs the question: are private real estate funds searching for investors in all the wrong places?
Though millennials may have a bad reputation, one that centers around massive amounts of debt and their spending habits, statistics actually prove this narrative somewhat false. True, they do have more debt than their predecessors, but the debt is more of a casualty of their situation rather than a sign of their financial prowess. In reality, millennials are the largest generation currently alive and are poised to be the wealthiest yet. Not only are they earning more than previous generations, they are better at saving as well.
According to a 2018 Bank of America survey, approximately 46% of millennials had accumulated at least $15,000 in savings. Additionally 16% of millennials, a small but significant amount, had saved over $100,000. With the subsequent growth of the job market, this generation’s ability to save, and therefore invest, will only continue to grow.
Millennials, as stated previously, seem to value tangible assets, which the real estate industry can definitely provide, especially private equity firms. Though their portfolios may be slim, this generation can provide incredible investments, but you must be willing to roll with the tide. Though interested in real estate, millennials often face obstacles that stop them from throwing their money into the collective pot. In turn, they have turned their interest towards companies that provide vacation rentals such as AirBNB, HomeAway, and VRBO.
If willing, private equity firms can expand their horizons past commercial and multifamily properties and enter the private accommodation playing field, which boasted market projections of $36 billion for 2018. Millennials have proved that they are more than capable of saving, all the while staying on top of market trends and feeding an interest in real estate. Private equity firms may have a giant market to tap into as long as they are capable of thinking outside the box.