Why is it that someone would choose to rent versus own their home? After all, we have all heard that the American Dream is home ownership. Don’t people rent only because they have to, and not by choice? Not exactly…
The “American Dream” Has Changed
People’s preferences are changing. Here are a few characteristics of those changes:
Flexibility: Whereas in the past, people wanted to establish themselves – get a great job in town, own a home, raise children and stay there for their whole lives – that has changed. More people, especially millennials, are seeking freedom through flexibility, and not being tied down to one particular location.
Simplicity: Even for the massive population who can afford to own but opts out for renting instead, they have forgone homeownership because due to their preferences for simple living. Rather than have to maintain a house, they are more attracted to renting a Class A apartment with fine amenetites (pool, fitness center, dog park, etc.) and living like kings and queens. Think about it…what a burden lifted!
Caution: Especially now, during the COVID crisis, we can imagine more clearly what a post-COVID world could be like. As I wrote in an earlier article, many people are changing their lives significantly. They are moving from large cities to the suburbs; they are moving from the cooler climates to the warmer; and they are moving from the expensive places to those with lower-cost of living. Some are choosing to buy their homes. Others will rent in upper class areas, enjoying their season in their particular season but keeping the option to move, and even travel the world if they choose. Working professionals do not want to be tied down to jobs, and now that many can work remotely, they don’t have to! So with their newfound freedom, why would they tie themselves down to a home if they do not have to?
Advocates for homeownership commonly argue that they are “throwing away” money each month in rent, but that general statement may not be totally accurate. It depends on what their options and situation are. Many people realize that by owning a home, they could be “throwing away” money each month in maintenance and attention. Whereas, for a “fee,” those with means can rent very nice apartments or homes and enjoy the comforts without the financial obligation associated with home ownership.
As real estate investors, we take note of this trend and seek to position ourselves to provide great and safe housing in areas where we we anticipate growth in demand. Recognizing that there is a shortage of real estate to that demand, we know that we have a real opportunity. Follow the Learn to Invest blog to learn more about wealth creation through real estate and how working professionals can become passive investors in multi-family assets.
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Rodney Robinson II