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Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
Personally I’m tired of hearing about this group. It’s millennials this, millennials that. Everyone seems obsessed with millennials! Gah!
But while I’m tired of hearing about them personally, as a real estate investor and marketer, I’m paying attention to them.
A LOT of attention.
Why? Because they’re the new wave of people who will be buying and renting our stuff. And like it or not, we need to pay attention to both WHO our customers are and WHAT our customers want.
So I took notice when I saw an article about them called Millennials on the Move for Better Jobs, Money.
According to the article, the driving force behind what they’re doing now is this:
“Some four-in-ten of unemployed workers are Millennials. This equates to 4.6 million unemployed Millennials, two million of which have been unemployed more than 27 weeks.”
The result is that they’re moving to cities with a comparatively higher cost of living because they’re attracted to markets with good job prospects and low unemployment, but tend to have higher rental rates and high home-price appreciation.
The Top Markets
The top real estate markets at this time are:
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Arlington County, VA
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Alexandria City, VA
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Orleans Parish, LA
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San Francisco County, CA
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Denver County, CO
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Montgomery County, TN
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Hudson County, NJ
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New York County, NY
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Multnomah County, OR
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Davidson County, TN
While the national unemployment rate is 6.1%, in the 10 counties seeing the highest influx of Millennials, the average unemployment rate is 5.2%. And the average household income is $62,496 compared with just over $51,000 nationally.
But in these counties, on average, it’s $1,619 a month to rent a 3-bedroom apartment compared with the national average of $1,550.
Arlington County and Alexandria City, both in the Washington D.C. area, saw an increase of Millennials 82% and 81%, respectively. Not coincidentally, the unemployment rate for Arlington County is 3.2% and Alexandria City is 3.6%.
If this is where Millennials are moving to, where are they moving from?
They’re primarily moving away from counties with smaller populations to counties with larger populations. The top market losing millennials was Fayette County, GA in the Atlanta metro area, which saw a 31% decrease in the millennial population, followed by Citrus County, FL, in the Homosassa Springs metro area, which saw a decrease of Millennials of 27%.
It’s also not a coincidence that the areaS they’re moving to also have some of the hottest real estate markets in the country, because real estate usually trends with employment.
And their numbers and impact will be huge.
Harvard Weighs In
A recent study by Harvard University is forecasting that Millennials — who have surpassed baby boomers as the largest and most diverse generation in history — will, by sheer numbers alone, boost the demand for housing.
The number of households in their 30s is projected to increase by 2.7 million over the coming decade.
The Harvard study concluded that:
“Ultimately, the large Millennial generation will make their presence felt in the owner-occupied market, just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and property values increased by double digits for the fourth consecutive quarter.”
The tools we have now as real estate investors are unprecedented in terms of scope. We now have access to data and forecasts that identify trends that are mere specks on the horizon right now.
It’s up to us to keep up with these trends and create a game plan to take advantage of them well in advance of when they come to fruition.
Dennis Fassett
earned a BS in Economics and followed that up with an MBA in finance. After working and corporate finance and banking for several years, he started buying single family houses, and quickly built a very nice portfolio of cash flowing rentals. When the credit markets started to dry up and he couldn’t get any additional single family mortgages he shifted his focus to apartment buildings. He now has over $3 million in rental real estate. He manages most of it his self and still has a day job. Dennis has even created his own Private Equity fund to buy apartment buildings.