We’ve all heard it – “the Millennial renters will soon make the leap to purchases.” The real question, though, is “when will these renters take that step?” How can we separate long-term renters from short-term renters?
From leasing over 220 apartments in 2015 to working with a management company owning 2,000+ units, we’ve noticed a trend – Millennial renters coming to the realization that the dream of owning may be a bit further than they had initially thought.
With that in mind, we’ve compiled a short list of four important elements of Millennial renters, which can help agents prospect and convert renters to buyers.
4. Millennial renters are worried about rent renewal increases. As many renters are aware, landlords often increase rent year over year. When signing a lease with potential tenants, the question of “how much will my rent increase next year?” seems to be the main concern for many Millennial renters. This year more than ever, our tenants have placed an emphasis on staying in their current apartment until they can afford to purchase or are moving to another apartment.
Renters are looking forward with the mindset of how will rent increases impact their ability to purchase in the near future. If rent increases, their first choice is to look on Craigslist for roommates to bring down expenses or move to another apartment in a slightly cheaper neighborhood. With social media playing a significant role, it is even easier to find sublets & roommates.
Not only do renters worry about rent increases – they also worry about job security and salary. Millennials starting a new career do not have the salary necessary to purchase or enough money saved for a down payment. Top that with student debt, medical bills and roommates, and you have yourself a recipe for a longer-term renter.
3. Millennial renters may be willing to pay higher rent but not a down payment…just yet. Buying is still not as cheap to Millennials as it may seem to agents. We are finding over the past few years that while rent prices are going up, Millennials are still hesitating to make the jump from lease to purchase. These renters are willing to pay a premium on rent in order to live in an apartment that meets or exceeds their standards. Millennials that want “rehab” and “granite & stainless steel kitchens” are willing to bump the budget another $50-$100/mo to get it. What do they have to lose? A lease is only a 12-month commitment (or shorter if they decide to find a sublet/relet) while a mortgage is much longer and more serious.
To Millennials fresh out of school or a few years into their career, committing to a 30-year mortgage is a bit too serious. Why drop most of their savings on a house when they can rent a “swanky 3bed/2ba in Lakeview w/private decks and parking included” for almost $1,000 per person? Why not rent for another year until that piggy bank piles up?
2. Salary increases, good credit, and seasoned home shoppers. A promising trend we’ve seen over the past few years is that tenants who renew or transfer to new apartments typically had a rise in salary. With rents going up year after year, many renters are starting to say, “If I’m going to pay this much for rent, I may as well own.” That’s what we’ve started to see this summer in tenants who either live alone or with a spouse/partner. Tenants with more than one roommate have shown more evidence that they will most likely be renting for at least another year. In our eyes, this is a good indicator on how to tell which renters are gearing up to purchase.
Another common phrase we’ve heard this summer was, “I’m so tired of searching for apartments and having to move year after year.” To agents, this should be a clear indicator that these renters are gearing up to purchase. Millennials who have been renting for the past few years seem to be the ones starting their preliminary condo search first. These renters know what they like and dislike, and are tired of the apartment hunt. This may seem obvious, but this demographic of renters seems to go unnoticed.
1. “Are you a leasing agent or Realtor?” So, you’ve rented an apartment to a client, he or she moved in months ago and it’s coming up on their lease end-date. When is the right time to reach out? Most renters receive their renewal paperwork from their landlords 60 to 90 days before the end of their lease; that is the opportune time-frame to see if they are ready to purchase.
When the time comes for your client to buy, would you assume they will contact you first? If you answered yes, you may be in for a surprise. As a Realtor, we know the difference between a leasing agent who only focuses on leasing and a Realtor who can do all of the above. To a Millennial renter, it is not so clear. Odds are once your client starts shopping to purchase, they will start online. They may think about reaching out to you since you rented them their apartment, but they need a condo now, not an apartment. Your client may think that apartments are all you focus on and search for a local Realtor who deals with purchases. Make it known: “when you’re ready to buy, give me a call, and I’ll find you a home just like I found you this apartment.”
Pogofsky Real Estate Group is a residential brokerage specializing in single and multifamily properties that was started in 2014 by brothers/managing partners Daniel Pogofsky (left side of picture) and Yoni Pogofsky (right side of picture). Yoni and Daniel have been in the property management business for more than six years, leasing and managing 2,000-plus units across the North Side of Chicago. In 2014, the Pogofsky Group opened their doors and expanded on the selling & buying side finding success in transitioning from leasing to selling.