FEEL LIKE HOMEOWNERSHIP OF REACH?

FEEL LIKE HOMEOWNERSHIP OF REACH?

Maybe It Doesn’t Have To Be

Believe it or not, there are ways around it. It turns out, millennials aren’t the renter generation after all. The 2022 Consumer Insights Report from Mynd says there’s a portion of millennial and Gen Z buyers who are pursuing homeownership as a way to build their wealth, but it may not be exactly the way previous generations have done it. The study explains how they’re breaking into the market today:
 
“younger generations of Americans are not buying into that dream in the same way that older generations have. A growing number of Americans are choosing to make their first real estate purchase as an investment property.”
Instead of buying a home and moving into it themselves, some young buyers are purchasing a home with more rooms than needed to use as a rental. This tactic may be gaining popularity, at least in part, because of the affordability challenges brought about by today’s higher mortgage rates. The report above mentions how many people in this group are considering this approach. It says:
 

“Almost half of Millennials and Gen Z (43%) are considering buying an investment property compared to only 9% of Baby Boomers and 27% of Gen X.”

Why Are Younger Buyers Buying Homes and Renting Out Rooms?

It’s a strategy that allows buyers to continue living in or nearby their current location. If they like the bustle of a city apartment or a neighborhood that they know and love, yet can’t afford to buy in that location, this strategy gives them another option. Instead of giving up on the idea of homeownership, they buy a home in a more affordable area with the intention of renting it out.
 
When you live in an expensive area, this could be a terrific option. Take Santa Barbara for instance. In our area, the idea of renting out rooms in one’s home isn’t a new one. Nor is the idea of finding an equity partner to help with the funding you may be lacking. In fact, this strategy was so popular in the 1990s there were several books written about it. Today, there are even more options.
 
When you’re starting out, it’s tough. Especially in coastal California, where you’re competing with everyone else who wants to live here. If you don’t have a job that pays a high salary, it’ll add to the difficulty, a difficulty made tougher when you don’t have a family member to help you get started. The 2022 First-time Homebuyer report from Bankrate.com cites the following issues facing millennials today:
 

“Of homebuyers aged 23 to 41, the most common reason for a mortgage denial was an insufficient debt-to-income (DTI) ratio, followed by a low credit score, with 29% of first-time homebuyers citing saving for a down payment as the most challenging part of the home buying process.”

For those committed to buying a home, Bankrate.com First-Time Homebuyer report found,
 
“Of homebuyers age 23 to 41 who made sacrifices to purchase a home, the most common was to cut spending on “luxury or non-essential items.”
You do have options. If you don’t have a family member, consider an equity-sharing partner. As with any partnership, there’s risk involved. Yet if you have realistic expectations, do your homework, and take the necessary precautions to set up the partnership correctly, there’s a good chance this strategy will play a key role in building your net worth. Whether it’s a family member, friend, life partner, or home equity program, there’s a structure with terms that can meet your needs.
 
Consider it the best of both worlds. Follow the Millenials and Gen Z example and focus on the long-term goal: Live where you want, and end up owning a home where you can afford it by generating passive income. In addition to having a rental stream of income, the equity you build in your house will also help grow your net worth over time.
 

The Bottom Line

Although the housing market is showing signs of cooling, now’s not the time to embark on a purchase without someone to guide you through the process. If you’re a first-time homebuyer, it’s even more important to have someone who understands your needs, concerns, and stresses.
 
If you’re thinking about buying a home as an investment strategy to build your wealth, let’s connect to explore your options and nearby areas that may have homes that fit what you’re looking for. Call me or text me for a confidential, no-obligation consultation. For text inquiries, please use the keywords, “real estate inquiry.”
 
I look forward to hearing from you.

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Lori’s reputation for exceptional service, discretion, and uncompromising integrity is at the heart of every transaction. With experience cultivated from almost 20 years of real estate transactions, both as an agent and investor, Lori brings her passion, market knowledge, and unmatched work ethic to each transaction.