Millennials are currently the largest living demographic and when it comes to rentals, they’re shifting the landscape. According to 2018 polling data, 44% of millennials rent while 21% live with family. Not only that, 84% see the appeal of home ownership but don’t think it’s realistic.
For landlords and real estate investors, such a large rental market presents hidden opportunities that can increase revenue or decrease turnover rates. That said, marketing your properties to them requires a unique touch. In true millennial fashion, this is different than previous generations before them.
Guide to Understanding Millennials
1. Who Are the Millennials?
Millennials, is a term used to describe the generation that was born between the early 1980s to mid-1990s. They’re called “millennials” because the generation graduated high school at the turn of the millennium.
In terms of outlook on life, millennials are generally adventurous, self-conscious, open-minded and cherish the communities they choose to belong to. But when it comes to real estate and the rental market, a few key traits are unique to this generation.
First, millennials grew up with the internet. Social media, the iPhone, apps, smart devices; millennials were amongst the early adopters of these technologies. As we’ll see later on, millennials rely on these platforms for almost everything, especially when it comes to apartment hunting.
Second, millennials got pinched by a unique period in history. Remember 2008? Well, the Great Recession affected millennials especially hard since it coincided with when most of the were graduating university or college.
2. Reasons Why Millenials Prefer to Rent
According to dozens of polls, millennials currently rent rather than buy. This is at odds with previous generations which saw home ownership as a life goal.
However, when we take into account the effect 2008 had (and still has) on this generation, preferring to rent over buying may not be that far-fetched. Polling suggests that millennials see home ownership as risky. Let’s not forget that that they saw what happened to US homeowners affected by the mortgage crisis.
Millennials are also the driving force behind the gig economy and the burgeoning freelancer phenomenon. Therefore, some millennials prefer to rent since it allows them geographic mobility.
Finally, renting allows millennials to live in more desirable or “happening” parts of cities that would otherwise be cost-prohibitive for home ownership.
3. Reasons Why Millenials Are Forced to Rent
Although millennials may prefer renting, the reality is that a confluence of factors are also forcing them from becoming homeowners:
The 2008 Great Recession
According to economic research, when new graduates and young workers enter the labour force during difficult economic times, they later have difficulties climbing the job ladder. By being forced to take “survival jobs”, they miss out on early resume-building experience opportunities. In turn, this delays when they can get access to high paying jobs.
The 2008 Great Recession forced millennials to take any job available at the time. According to studies, millennials are now working lower paying jobs than their parents were at their age. This greatly affects the millennials’ ability to enter the real estate market. With Canadian home prices skyrocketing over the last 10 years, millennials are effectively priced out of the market until their mid- to late- careers.
Impossible to save for a downpayment
After repaying student loans, rent and groceries, the little that’s left aside for a downpayment gets eaten away by the inflation of the real estate market. Simply put, market growth is constantly raising millennials’ barrier to entry into real estate. This effect is compounded in markets like Vancouver or Toronto (and soon Montreal and Ottawa) where real estate inflation is rapid, but also prohibitively difficult to get a foot into.
Postponing marriage and children
Millennials’ views on marriage and children are radically different to that of previous generations. Where the goal was to get married and have children at a young age, millennials are pushing back these two life landmarks to their 30s.
This specific trend affects the rental market. By not being required to live in a townhouse or single family dwelling, millennials have the option to live in smaller spaces closer to entertainment and amenities offered by bustling downtown cores.
Changing jobs often in early career
Because of the Great Recession, millennials are forced to acquire resume-building experiences by switching jobs often in their early careers. Gone are the days of sticking with one employer your entire career: being a jack of all trades with a rich experience portfolio is now a requirement in the Information Age.
While this job hopping is great for experience diversification, it has an impact on earning potential. By changing jobs often in their early careers, millennials are constantly restarting at entry-level salaries instead of climbing the corporate ladder or being able to negotiate a raise. These lower wages mean less chances to access the real estate market (can’t afford a downpayment) and not being to afford home ownership (mortgage repayments).
4. Why Renting Can Beat Buying for Millennials
Despite being priced out of the real estate market in their early careers, renting instead of buying can still be an advantage for millennials (even those who were fortunate enough to save up for a downpayment).
In the Information Age workers need to move to where the work is and be able to respond to a mobile and fluid labor market. That involves moving cities, or because of modern traffic, moving from one end of the city to the other.
Millennials caught in this new economic reality would be at a financial disadvantage if constantly buying and selling real estate. Consider the expenses of buying a new property: land transfer taxes, utilities hookup fees, renovations, new furniture and moving expenses. Now the cost of selling: realtor fees, breaking a mortgage, legal fees and moving expenses. In such a context, renting makes more financial sense for millennials.
Another reason why renting beats buying for millennials is lifestyle. Unlike their parents, millennials typically favor living downtown. This gives them access to amenities and entertainment. Unfortunately, the real estate markets in most Canadian cities’ downtown cores are prohibitively expensive, especially for first time home buyers. Thus, renting grants this access without having to overcome the financial hurdle of saving for a downpayment or the later obligations of a mortgage.
5. What Are Millennials Expectations When Renting?
When attempting to locate an apartment, millennials expect the following out of the ideal rental:
- Access to public transit, or a parking spot;
- Proximity to shopping and entertainment;
- Easy access to work centres, family and friends.
Notice how all those relate to location? Now consider the lifestyle of the millennial: young workers with no kids, wired and dependent on technology, and with some disposable income. Such a renter would require:
- A pet friendly property (35% of pet owners are millennials);
- Clean, renovated and well-maintained apartments;
- Access to high-speed and reliable internet;
- Safe and secure environments.
6. How Do Landlords Attract Millennials?
Landlords need to remember that millennials helped shape the way the internet, social media and “tech” to what we know it now. They’re a tech-savvy bunch and technology plays a key role in how landlords market their rentals to them.
Online listings (beyond Kijiji)
Landlords have to consider that over 92% of millennials own and use smartphones.
When it comes to finding rentals, our own research shows that a high percentage of online searches for apartments are done on mobile.
That means that landlords need to have their properties listed on platforms that are optimized for mobile use (the listing must load fast) and that are designed to deliver a positive experience (minimal clicks and great user interface).
Platforms like Kijiji and Craigslist are great for selling a used canoe but they’re frustrating to use on mobile. After looking at one or two listings, the average tech-savvy user will bounce from a frustrating user-experience site and seek out a better one.
You need to list your properties on sites where a millennial can sort by map, near amenities or by price (hint: Rentals.ca offers such features… and for free!)
Put some effort in the online listing
The days of putting up a listing with the address, a picture of the building’s exterior and a crooked underexposed picture of the living room are gone. “Why bother spending any of my personal time visiting that?” would think a typical millennial. And they’d be right!
Remember that millennials use technology to enhance their lives. First impressions aren’t during a visit anymore, they’re online. Your listing needs to sell on the first view.
Here are practical steps you can take to make your listings more appealing:
- Use great pictures: either hire a professional photographer or if you’re on a budget, learn how to take great apartment pictures yourself. If you want to go the extra mile, you can also stage your rental via specialized services;
- Describe the property with experiences: skip the one-liners like “sunny living room” and get creative. Upsell the experience of living in the unit. Is it quiet? Then try “Your own slice of paradise for cozy Sunday mornings”. Is the dining area large? How about “Large dining room perfect for hosting dinner parties”
- Point to specific amenities: again, skip the one-liners like “close to everything”. Rather, use accurate distances to specific amenities. Is it a 75 meter walk to the metro station? Then write that! If you’re close to landmarks like pubs, restaurants, then name them. What’s better?
|Close to great restaurants||
- Market the neighborhood: in your listing, explain with experiences why your apartment is in the perfect neighborhood. This doesn’t need to be a 5 paragraph essay. Just focus on the high-level positive aspects of the area.
7. How Can Landlords Retain Millennial Renters?
For the most part, retaining millennial renters isn’t overly complicated. Treat them like you would any previous generation: communicate efficiently, be on top of renovations and repairs and be reasonable when raising rent.
That said, if you want to go the extra mile with millennial renters, here are a few practical tips you can implement:
- Communicate via technology: If you have important information to convey to your millennial renters, leaving a letter in the mailbox won’t cut it anymore. If you’re a single property owner, connect with your tenant via email. While it’s appropriate to add your tenant on Facebook, just remember landlord-tenant social media etiquette. Landlords of multi-unit properties can create social groups and communicate via those channels. At the very least, every landlord should use email.
- Be somewhat eco-friendly: Being a self-conscious generation, millennials generally have a strong opinion of how the environment should be protected. While you don’t need to install solar panels, the following are must-haves for millennial renters: easy access to recycling bins, smart thermostats and appropriate utilities-saving measures (weather-stripping, draft-proofing and efficient toilettes
- Renovate with technology: You don’t need all the bells and whistles, but install a few amenities in the unit that facilitate the millennials’ integration of technology into his or her life. For example, replace the front hall and kitchen electrical outlets with dual-use electrical and USB charging plug. Or if your property’s construction can’t deliver wifi to all areas of the property, consider installing a wifi distributor.
- Create areas for experiences: Remember that millennials are sacrificing space for proximity to amenities and entertainment to live experiences. So why not let them create those memories in their own homes? If you have suitable areas in your property, consider converting them to public areas where your renters can invite friends and family and live those experiences. A small area with clean and modern patio furniture with a decent barbeque are more than enough.