Investment Properties Are Becoming The New Starter Homes

When you think of purchasing your first home, do you think of a starter home? A forever home? What about an investment property? For some, the thought of a “starter home” no longer relates to a primary residence, but instead to an investment property. Who is at the forefront of this latest housing trend you might ask? It’s mostly Millennials,  the younger generation of homebuyers.  According to realtor.com, more than 45 million millennials are going to be right at their “first-time buying ages of 26 to 35 in 2022.” More details down below, check them out!

Over the past couple of years, younger millennials and Gen Z have been changing the real estate industry by purchasing investment properties before their primary residences. In fact, in 2021,  44% of vacation rental buyers were Gen Z and Millennials! If you ask us, that makes up a decent chunk of the vacation rental buying market! While there are many factors as to why this trend has been increasing in popularity, one of the main reasons is remote work. Since remote jobs allow for a more flexible work schedule and environment, remote workers can easily switch up their scenery to the office space in their investment home when it’s not in use as a short-term rental & can even use their investment home as a personal vacation spot during their PTO. Plus, using an investment property as a short-term rental is a great way to earn passive income that can later be applied as a down payment on the purchase of their first primary home! All in all, the options with remote work and investment properties are endless & this generation is already getting creative with it, so we can only expect to see a continual rise in this younger generation taking advantage of investment properties!

What’s another factor for the increase in investment property purchases? The pandemic, of course! While the pandemic had an impact on all aspects of the market, it had a huge effect on the housing market— interest rates hit an all-time low and everyone wanted in! Younger millennials and Gen Z used their savings to purchase these ‘second homes’ as their first purchases. By purchasing these homes first, they faced a huge trade-off though: as a first-time homebuyer, you can normally put down as little as 3-3.5% (96.5-97% financing) for a conventional/FHA loan on a primary home purchase, but this advantage DOES NOT apply to investment properties. While this also means paying more upfront, the upside is that a larger percentage down typically coincides with a lower interest rate. Thus, these buyers do get to experience the “best of both worlds” when it comes to renting and being a homeowner. They are still able to build up equity like a homeowner, earn passive income while renting out their property and enjoy their lifestyles from whatever location they choose.

If you’re still on the fence yourself & wondering if purchasing an investment property may be right for you, remember to keep these perks in mind: 1) you can take advantage of market increases (like the seller’s market we’re in right now) and make a decent return on your investment, and 2) you can add any passive income you earn from your investment on top of the income from your full-time job and apply it to your savings or use it toward another investment property/primary home you’ve had your eye on but weren’t able to previously afford in your desired location.

Home prices are anticipated to increase throughout 2022, if you’re interested in getting started purchasing an investment property there is a 60 second or less questionnaire located on the right of the screen. If you decide to fill it out one of our licensed mortgage experts will reach back out to you to discuss further. According to realtors.com “renters will see increasing rents in 2022” which is good news if you decide to purchase an investment property for long term rentals.