With millennials finding themselves priced out of their local housing markets, many are searching online for opportunities to invest in real estate elsewhere, according to a report in Curbed.com.
The report notes that millennials are instead getting creative with their investments, which they see as a way to build up savings so that they can ultimately break into homeownership in their own areas.
“We find that millennials see the investment landscape very different than their parents do,” Alan Lewis, co-founder of DiversyFund, a platform where users can invest in multifamily developments online, told Curbed.com. “They’re jaded by the homebuying story, they’ve seen people overpay during the peak and be upside-down in their homes, and they see stock market volatility and don’t have an appetite for it. They want something that offers a departure from the rollercoaster ride.”
For example, 31-year old Michael Pickens, who works in the San Francisco Bay Area, has so far found homeownership unobtainable in what is one of the country’s most expensive markets. But, he and his wife are the owners of six homes in other parts of the country, including Memphis, Tennessee, and Pittsburgh.
“It’s very video game-like, like buying stocks,” Pickens, who used an online platform called Roofstock to buy the investment properties, told Curbed.com. “I’m physically buying these buildings and managing properties from afar.”
Roofstock provides a service that allows users to pick rental properties based on various returns and risk factors, such as location and tenant history.
Pickens’ first purchase was a Memphis that he snapped up for $129,000, putting 20% down on the property. He said that after the mortgage payment and property manager fees, he still earns about $200 a month on the property.
Consumers can easily buy investment properties around the country, and also manage them, thanks to technology platforms like Roofstock.
“Smaller cities and rising markets offer the best chances for more consistent monthly returns, and emerging investment platforms offer a channel for capital to flow from the coasts,” Curbed.com reported. It adds that in many markets, more money can be earned through appreciation of the real estate asset, rather than the monthly cash flow.
Eleven percent of single-family homes sold last year were purchased by investors—the highest on record, according to data from CoreLogic.