Gen Z Is Already Investing In Real Estate — How Can They Afford It?

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There’s no shortage of TV shows that make it look like anyone can get rich through real estate investing — but in real life, the barriers to entry are high and wealth does not come easy. Those barriers include income, credit and savings requirements that are typically well out of reach of 18- to 25-year-olds.

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But a new study from GOBankingRates that surveyed more than 1,000 American adults found that nearly one in four Gen Zers — 24.1% — report being real estate investors. GOBankingRates spoke with experts from across the industry to understand how, exactly, so many young upstarts could be dabbling in something that’s almost universally reserved for more mature investors.

This is what they said.

By ‘Investing,’ They Might Mean ‘Planning To Invest’

Several experts said that the study’s results can only be interpreted to mean that Gen Z considers purchasing a first home as a primary residence to be an investment in real estate, which, essentially, it is.

But since even basic homeownership is out of reach for so many young adults, one expert deduced that Gen Zers might consider the simple act of socking money away for a future down payment to be a roundabout investment in real estate. 

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“One behavior that I suspect may be included in these responses is the process of saving up for and purchasing a residential property,” said Melanie Hanson, editor in chief of EDI Refinance. “Gen Z is especially tuned into the idea that renting is ultimately a waste of money when compared to being able to build equity in your own property, meaning that many of them who can’t actually afford a home yet may be building their savings for a down payment and legitimately see this practice as a form of investing.”

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High-Earning Gen Zers Can Work in Low-Cost Areas

Most members of every generation that came before, including millennials, had to buy homes that were within commuting distance of their jobs. That, in most cases, pinned people down to living in areas where the income levels mostly matched the cost of living.

Gen Z, on the other hand, is coming of age in a time where it’s possible to live in an inexpensive rural area while earning a big-city wage — a huge benefit that could accelerate the property-buying timeline.

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“Gen Z is more likely to relocate to more affordable cities and towns around the country,” said Shri Ganeshram, CEO and founder of Awning.com, a real estate company for investors. “Many people that are part of Gen Z are part of a remote-first workplace, allowing them to afford real estate earlier in their careers.”

Many Are Probably Leaning on Mom and Dad

According to The New York Times, nearly one in three young adults between the ages of 18-25 are living at home with their parents or other relatives. While some of them are surely staying in the nest purely out of necessity, it’s certainly plausible that others are using the opportunity to supercharge their savings in anticipation of buying a property of their own.

“It is common for Gen Z to live at home and save big money on rent until they are able to enter the real estate market themselves,” said Jake Hill, CEO of DebtHammer. “This choice has deeply impacted their ability to afford to invest at a young age.”

Then, of course, there’s always the likelihood that some parents are helping their adult children leave the nest by contributing to their down payments either as loans or as gifts disguised as loans.

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“Gen Z is leaning on older generations for the initial down payment of purchasing a property and then transferring ownership,” said Ganeshram. “This is driven by older generations being open to real estate investment and having higher assets. It’s also the result of higher rents, which make it much more affordable to purchase by comparison.”

Alternative Real Estate Investing Was Tailor-Made for Gen Z

Forbes examined the phenomenon of Gen Z’s gravitation toward real estate investing and found that modern alternative real estate investment opportunities are a natural fit for today’s young adults. Gen Z, the publication concluded, tends to steer its money toward purchases and investments that are fair, equitable and rooted in social justice.

Alternative routes like real estate crowdsourcing and blockchain-based investing remove the human biases that have historically hindered racial minorities, LGBTQ+ buyers and other underserved populations.

That dynamic could be icing on the cake for Gen Zers who simply don’t have the resources to pursue the traditional purchase of real estate.

“I suspect that the majority of real estate investing among Gen Z is happening through investment in real estate management companies or investing in tokenized real estate through services like Groundfloor and Redswan,” said Leonard Ang, CEO of iPropertyManagement. “The high capital requirements to individually purchase an investment property mean that this is an option that’s out of reach for most members of this — or any — generation.”

REITs Offer Easy Access for Gen Z and Everybody Else

It’s also likely that at least some of the 24% are buying into REITs. Real estate investment trusts offer exposure to real estate ventures of all kinds, including commercial, residential and mortgage-backed securities without the purchase of any physical property. Since they trade on the open market as individual shares or as ETFs, REITs make investing in real estate as easy as buying a share — or even a partial share — of Apple, Walmart or IBM.

“The vast majority of Gen Zers who are investing in real estate aren’t investing by the traditional way of purchasing properties,” said Andy Kalmon, CEO of Benny. “Instead, we’re seeing them invest in REITs, real estate mutual funds and companies with a real estate focus. These nontraditional ways of investing in real estate are still relatively low-risk, high-reward, and they are much more accessible for the younger generations and those with a smaller financial safety net.”

Gen Z Is Thinking Outside of the Traditional Real Estate Box

Daniel Apke, CEO of Land Investing Online, has seen Gen Zers accounting for a larger percentage of his YouTube audience in the last six months — they’re tuning in to learn how to invest in low-priced land instead of pricier properties.

“Land-flipping appeals to Gen Z because it doesn’t hold the high barriers usually associated with real estate investment,” said Apke. “You can buy land with just a few thousand dollars, and if you know what you’re doing, flip that into a strong return. From my perspective as a teacher and investor, all nontraditional investment forms are attracting younger generations who realize that they’re going to have to think outside the box if they want to make investing work for them.”

The Forbes article also profiled Gen Zers who were opening the door to real estate investing through communal “house hacking.”

“House hacking is buying a multifamily home and living in part of it, or splitting your single-family house to be able to live in one part of it and rent the other,” said Fluent in Finance founder Andrew Lokenauth, an investing and banking professional who has held senior positions at institutions like Goldman Sachs and AIG. “House hacking can be very beneficial and is worth considering, especially in areas with increasing housing demand. The rents from all the other occupants add up to a significant chunk of the monthly mortgage payment, allowing the owner to live rent-free, or nearly so.”

More From GOBankingRates

Methodology: GOBankingRates surveyed 1,004 Americans aged 18 and older from across the country between July 21 and July 24, 2022, asking six different questions: (1) Where did you learn about personal finance?; (2) How much overall debt do you currently have? (Including student loan debt); (3) How much of your monthly income do you put towards rent/housing?; (4) What is your opinion on remote work/work-from-home policies at your current or future employer?; (5) Do you invest your money? If so, what do you invest in? Select all that apply:; and (6) What minimum salary would you need to make to be happy?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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