The Next Generation of Renters

As millennials continue to bore into the real estate market, renting has become the mainstay of the younger generation.  Inability to save and lack of a strong credit history are key contributors to homeownership rates dropping.  If this trend continues the next Generation, Z, will be absolutely forced into renting.

RentCafe recently released an incredibly detailed study indicating that Generation Z will pay over $102,000 in rent by the time they hit age 30.  This is based on millennials spending approximately 45% of their income on rent, which averages out to $92,600 by the time they hit 30.  Compare this to Baby Boomers who paid approximately $66,900 in rent before turning 30.

Florentina Sarac states “Given their overwhelming student loan debt, younger Millennials may carry on renting, simply because the prospect of buying is not yet attainable.  On the other hand, older Millennials are starting to slowly shift towards home ownership.”

Rent burdens have been the hardest on younger Millennials, aged 22-29, with 47%.  Older Millennials clock in at 44%.  With a substantial amount of income dedicated to renting, Millennials will not be afforded the luxury of owning a home easily.

Furthermore, Millennials earn and pay more in rent than both Generation X, and Baby Boomers.  The income difference ranges from $4,500 to $10,900 while the rent difference ranges from $10,400 to $21,600.

“It’s worth noting that the rent difference between Millennials and Baby Boomers is twice as big as the income difference.”

Without a drastic shift in the real estate market, it will become more and more difficult for Millennials and subsequent generations to make the leap from renting to home ownership.

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Home Ownership & Wealth Generation: Should you be renting?

A recent study has suggested that renting an apartment can make you more money than owning a home.  As shocking as this may sound, a thorough review of the data, reveals you should take your time before doing anything drastic.

A Revision of the American Dream of Homeownership,”published in 2017, does not outright tell us that renting is more profitable, but sobers us with the fact that property appreciation is not as wealth generating as we have come to believe.

pexels-photo-572056.jpegHome owners tend to accumulate wealth more than renters, now, due to the accumulation of a strong down payment for a house.  From saving for a down payment to switching to home ownership, owners generate wealth easily while renters do not.

The study however, suggests that renters who invest in the stock market could easily outperform homeowners that do not.  “When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation,” states the study’s authors.

Also noted by the study, is that “the difference in wealth between renting and owning can be most affected by choices within the scope of the individual rather than through the impact of exogenous market variables.”

Cryptocurrencies and the Real Estate Industry

Cryptocurrencies like Bitcoin are new electronic cash systems that are completely decentralized with no server or central authority. Bitcoin and other cryptocurrencies advocate that blockchain technology is the key to a secure monetary future. By providing unique access codes, secure transactions can take place from almost anywhere in the world and the blocks of code will create an incorruptible record of each transaction and access point.

This is relevant to the real estate industry because it would allow buyers to provide secure funds in a relatively short amount of time.

According to Bitcoin, there are several advantages of using their form of cryptocurrency. Users can make or receive payments regardless of location or time of day. Transfer fees are cheaper because they are not based off of the total amount of funds being transferred. Since private consumer information is not included in the transaction records, transactions are more secure.

Users can also add layers of protection to their crypto assets by using two factor authentication and alternative backup methods.

The real estate industry is slowly starting to accept Bitcoin and cryptocurrencies because of these advantages. The International Blockchain Real Estate Association is a member-focused advocacy, educational, and trade organization dedicated to implementing blockchain real estate.

According to their website, cryptocurrencies can “reduce costs, stamp out fraud, speed up transactions, increase financial privacy, internationalize markets, and make real estate a liquid asset”. Some luxury homes for sale are already being listed on MLS’ with cryptocurrency price tags and some landlords let renters to pay with virtual currency because landlords do not have to worry about checks bouncing and funds clearing after a day or two.

Blockchain technology is not without its own challenges. Cyber fraud has resulted in the loss of tokens worth millions of dollars. Many sellers currently do not accept Bitcoin and other cryptocurrencies because they have little to no experience with them. Currency volatility has always been an issue and new cryptocurrencies are being invented on a regular basis. Despite these drawbacks, more and more real estate opportunities are beginning to welcome blockchain technology.

 

 

City Living on a Budget

As urban centers continue to see rents skyrocket, it is important for many to learn how to live in a city on a budget. Here are some tips to get you started:

1. Build a real budget and stick to it.

Learvest is a financial planning tool created by a Harvard Business alum. Their team recommends at 50/20/30 rule.

50% of income should go towards fixed costs (this will largely include rent)

20% should go towards paying off debt or be put into savings

30% should be used for flexible costs (entertainment, eating out, etc)

2. Think about what your rent includes and take advantage of these offerings.

Think about what rent includes. Are utilities included? Do you have a gym? Is parking included? Is public transportation readily accessible nearby? Do you have access to free laundry?

These are all money savers that can lower your effective rent.

3. Reduce transportation costs

A car can easily zap your budget. Financing/leasing costs, gasoline costs, maintenance, and insurance add up very quickly. Instead, opt for public transportation and perhaps look into a bus pass. A bicycle can pay itself off in no time and prove to be a worthwhile investment.

4. Eat-in more frequently.

While it can be tempting to try the array of restaurants that come with living in a larger city, make a concerted effort to cook your own food. This can save hundreds of dollars per month. Try to make cooking a fun event and include friends when possible. Likewise, packing a lunch during the day can also have the potential to save hundreds of dollars per month.

 

 

Little to no housing being built in the suburbs

The Boston Foundation reports in their annual Greater Boston Housing Report Card that while it is true that new housing is being added in the Greater Boston area, the majority of the units are in the city of Boston itself and in just a few surrounding cities while towns in the suburbs are seeing little to no construction.

2Young and working families are finding it difficult to afford to live in the city but since housing prices are increasing in the suburbs because of a lack of new construction these families are left with few options. Only a handful of towns have added noteworthy amounts of housing, including Weymouth, Framingham, Plymouth, and Sharon. Out of about 13,000 building permits that were issued this year for the entire Greater Boston area, about 40% of those were issued by the city of Boston.

Although some believe that housing prices may inhibit economic growth, schools and jobs in the area continue to attract students and professionals every year. Rent prices are also slowly falling as a direct result of the additional housing that has become available.

 

 

Private Owner Perspective: Why List Through An Agent?

Screen Shot 2017-11-20 at 10.09.46 AMThere are quite a few steps typically required for any private landlord to procure a quality tenant: marketing, conducting showings, screening tenants, and preparing lease documents, among others.

While seasoned private landlords might even enjoy the aforementioned processes, many landlords would simply prefer their unit be rented in a timely manner by a high-quality tenant.

The most obvious obstacle for any private landlord in this situation is time. It can be significantly difficult to juggle a full-time job, schedule showings, conduct showings, screen tenants and prepare documents.

Furthermore, there is a certain level of expertise and experience that a private landlord might want to have before tackling the necessary steps towards attaining a new tenant. For example, if a landlord has never drafted a lease on his or her own, an experienced agent can step in and do this on his or her behalf.

Marketing rentals is also a facet of the procuring process that agents may assist with. Both verbiage and listing flow are critical components to successfully attracting tenants when marketing online, and rental agents know what has been tested in the marketplace and works.

While agents have mastered the use public listing sites such as Zillow and Craigslist, they also have access to the Multiple Listing Service (MLS), increasing visibility in ways the typical private owner simply cannot.

For screening purposes, Rental Beast provides both landlords and agents with a new ‘Apply Now’ function. Screening traditionally has been a burdensome process.

Screen Shot 2017-11-20 at 10.31.14 AMNow, landlords and agents have the ability to seamlessly screen tenants via Rental Beast’s online application and integrated partnership with Transunion. It is important to note that only private landlords are able to view sensitive application results, even if a given application was triggered by a partner agent on behalf of the landlord.

We at Rental Beast understand that private landlords, regardless of experience level, like to control the tenant selection process with varying degrees of firsthand involvement.

Rental Beast lends a landlord the flexibility to simultaneously market a property on his or her own, and receive agent assistance via the Rental Beast platform.

With Rental Beast, a landlord will only pay the brokerage commission once he or she has decided to accept a tenant procured by the agent and the lease is officially signed. In the meantime, landlords are able to proceed exactly as they were before. There is no upfront fee that will be collected.

We hope this post helps you, the private landlord, decide what avenue is best for both yourself and your rental property. Rental Beast can serve as a zero-risk solution that both maximizes visibility on your property and lends you the ability to receive agent assistance.

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Cambridge imposes restrictions on AirBNB rentals

Cambridge.jpgMost of the focus on AirBNB stems from the money lost from a lack of taxation, an estimated $15 million from around 592,000 guests in Massachusetts last year. However, while other lodging establishments need to adhere to a strict set of municipal regulations, the owner of a unit on AirBNB currently does not.

State Representative Aaron Michlewitz recently proposed a bill that would impose safety and insurance regulations on top of taxing units, stating: “The taxation without the regulation piece is where the debate stands now”.

While some municipalities are waiting to see what the state decides to do, the Cambridge City Council has already voted to impose their own regulations on AirBNB rentals. Only hosts who live in the same or adjacent building would be allowed to make their units available. These units would need to be registered with the city and concede to inspections once every five years.

This would allow owners to continue to collect income from short-term rental units while ensuring guest safety. The new restrictions will take effect in April 2018.

It’s estimated that about 90,000 guests used AirBNB to find accommodations in Cambridge last year.