by Karina Gafford
For a population with reportedly high unemployment rates, high debt, and low credit scores, millennial growth is surging in markets with surprisingly higher than average rental rates and cost of living expenses. Daren Blomquist, Vice President of RealtyTrac, explains that this is a result of the higher employment levels in these areas. He writes, "Naturally, millennials are attracted to markets with good job prospects and low unemployment but that tend to have high rental rates and high home price appreciation, while boomers are moving to lower populated areas which have slower home price appreciation." Four military areas in particular are seeing the benefits of this growth in millennials over the past five years.
Four Military Installations with High Growth in Millennial Population
The Pentagon, home to over 26,000 employees alone, is located just over the bridge to Washington, DC, in Arlington, VA. Both Arlington, VA, and Alexandria, VA, have seen the top two growths in millennials over the past five years. In addition to the Pentagon, additional military installations in the immediate area include Joint Base Myer-Henderson Hall, Joint Base Anacostia-Bolling, and Fort Belvoir. Arlington and Alexandria have seen an 82 and 81-percent growth in millennials over the past five years, and millennials now represent close to two-fifths of the population in these cities.
Buckley AFB, home to Air Force Space Command, intelligence units, and a future large National Security Agency site in Aurora, Colorado. The Denver area has seen the fifth largest growth in millennials in the country, behind only Arlington, VA, Alexandria, VA, New Orleans, and San Francisco. This area has seen a 57-percent growth in millennials since 2007, and millennials represent almost one-third of the population.
Fort Campbell, home of the 101st Airborne Division and 160th Special Operations Aviation Regiment. Fort Campbell sits on the Kentucky-Tennessee border, and the Montgomery County area that surrounds part of it has seen the 7th largest growth in millennials over the last five years. This area has seen a 46-percent increase in the number of millennials who have moved to the area between 2007 and 2013. Millennials represent just under one-third of the population in this area.
Fort Hamilton, the last active military installation in New York, currently serves to provide support for the Army National Guard and U.S. Army Reserve in that area. Fort Hamilton is in Brooklyn, and is adjacent to New York County (synonymous with Manhattan), which has seen the 9th greatest growth in millennials in the last five years. This area has seen a 43-percent increase in millennials moving to the area. Despite a median home price of a whopping $850,000, millennials represent just under one-third of the population in this area, showing that high prices don’t scare them off.
So Why are Millennials Flocking to These Areas?
The top ten areas that have seen the highest growth in millennials have several things in common, including lower than average unemployment rates and higher than average incomes. The median home prices also far exceed the national average by more than $150,000.
How Can You Invest in Millennial Growth in These Areas?
The average gross yield for rentals in these top ten growth areas is 6.2-percent. Average gross yield means the amount of rental income that you receive each year divided by the amount that you paid for the rental property. The median home price in the top ten areas was approximately $410,000; therefore, the annual rental income yielding 6.2-percent was just over $25,000, or around $2,100 per month.
BankRate suggests that a rental with a 10-percent gross yield provides the best investment. However, a 6.2-percent gross yield is still substantial. Given that military families don’t get to choose their military relocation, for Pentagon families, Buckley AFB families, Fort Campbell families, and Fort Hamilton families who purchased a home over the past few years, the time appears ripe for renting.
Just because you own a property in one of these areas, though, doesn’t mean that your property is millennial appropriate. If you are PCSing to one of these areas with a plan to buy a property as part of your future long-term rental portfolio, keep in mind the key items that will appeal to this fast growing group of renters:
One of the key commonalities of these areas is walkability. A recent University of Arizona study showed that an increase in walkability of 10 points in an area can improve the value of your home or rental by up to 9-percent! Millennials increasingly choose to cycle rather than drive to work—my in-laws are constantly amazed that my husband chooses to commute by bike rather than by car. For millennials, the increase in walkability (or "bikeability," for that matter) is motivated by health, environmental concerns, and frugality. If you do PCS to one of these areas, keep walkability in mind if you’re planning a long-term rental strategy to the millennial market.
Style and Amenities
When planning on marketing to millennials, you’ll likely spend more on the property because of higher costs associated with purchasing in an area with a greater walkability score. However, you can trim costs on style within the home itself. Given their budgetary restrictions, millennials recognize that they need to compromise on some aspects. Numerous studies show that if your home has good walkability, you’re wasting your dollars by investing in stainless steel and granite-laden gourmet kitchens. Provided that you have a clean, well laid out space for entertaining (very important), those Formica countertops will do just fine. Even though millennials are reportedly more conscientious than any other generation about environmental issues, they are less concerned with ensuring energy efficiency within their own home. Affordability ranks higher than energy efficiency on their wish list. If your appliances or lighting happens to be energy-efficient, that’s great, but there’s no need to install these items unless you are personally motivated by environmental concerns.
If you don’t have good access to internet, though, then forget about it! Consider marketing to a much older generation instead, but if you’re planning on marketing to the Boomers, their higher buying power means that they’re less likely to compromise on any item on their wish list. It may be cheaper to try to integrate greater access to high speed internet instead.
For more tips on marketing to the various generations, check out our blog on Key Words to Emphasize in Your Home Sale Listing. Many of these tips will apply for your rental listing, too. Also, if you’re currently living in one of these areas, or if you just received orders to relocate to one of these areas and are considering buying a home to later convert into a rental, make sure to first consult with a real estate agent who is experienced in your area. We recommend both reading reviews on and interviewing more than one agent before determining who would be best fit for helping your military family make this big decision. MilitaryByOwner’s recently improved local business listing section shows reviews and certifications of real estate agents to give you a more comprehensive look at agents in your area.