Last year, Blockchain Capital, a venture capital company that invests in blockchain-related companies, conducted a survey that found that 22 percent of millennials preferred to invest $1,000 in Bitcoin than in real estate, and 27 percent preferred $1,000 of Bitcoin over $1,000 of stocks.
While I don’t necessarily agree with it, I understand their desire to invest in cryptocurrency over the stock market. The millennial generation avoids investing in the stock market primarily because of the Great Recession of 2008. They grew up in the aftermath of the worst financial crisis since the Great Depression, and many are still scarred from the devastation it left in its wake. In fact, a BlackRock study found that millennials consider the stock market “too risky” to invest in. The irony here is that Bitcoin is just as risky, if not more.
Last year, Bitcoin began its historic run starting at $930 in early 2017 and peaked at $19,783.21 on December 17, 2017, but days later, the currency dropped 30 percent, shaving billions of dollars off of the total cryptocurrency market capitalization.
While millennials eschew the stock market, they remain positive and upbeat about real estate investing. Contrary to Blockchain Capital’s survey, research from Fannie Mae found that 85 percent of millennials agree that real estate is a good investment. But in my opinion, it’s not just any real estate that makes a good investment, but rather specifically multifamily housing.
Yes, homeownership is great, and your home could certainly appreciate over time, but a home doesn’t pay you back each month for your investment. In fact, it’s quite the opposite. You pay for your home in the form of a mortgage each month until it’s paid off, whether it’s over 15 or 30 years. Multifamily housing investments, particularly within the workforce housing space, however, can yield attractive returns and make a great investment strategy, even for millennials willing to put skin in the game.
As more and more households are renting instead of buying, there is a major imbalance between the demand for and supply of workforce housing units on the market. Millennials are more driven to rent than own because they are a generation that is constantly on the go. They prefer to be able to get up and go at any time rather than remain tied down to a home. Additionally, with more than 43 million renter households across the country, there is no shortage of demand. Certainly, you can argue that buying a single-family home as a rental property is a good investment. However, what happens when your tenant leaves and you’re left with a mortgage on the home with no rental income to support that payment? In a multifamily property, even if several units are vacant, the financial impact is much less severe, as there are still enough occupied units generating revenue to cover debt service payments.
In addition to the revenue-generating opportunity that real estate affords investors, real estate also has the unique ability to consider socially responsible investing. Millennials are a generation of do-gooders, and many have chosen specifically to work in professions that allow them to “have a meaningful existence.” Searching for purpose seems to be on the mind of every millennial, and investing in cryptocurrencies does not provide investors with adequate opportunities to affect the world around them or help those in need.
At Castle Lanterra Properties, we have made socially responsible investing a core part of our mission. One of our goals is to “do well by doing good”—by providing all members of a community a chance to live in quality, affordable housing, and be proud of where they live. We focus on giving back to the community and to the environment by building desired amenities and by introducing environmentally-friendly appliances and fixtures to each of our properties—things we know are important to our core demographic.
While cryptocurrencies certainly seem like attractive investments and can yield high returns, as was proven last year, they are also extremely volatile and can dip at any moment, causing investors to lose everything. While real estate has its own set of risks—the market can dip, interest rates can rise, etc.—when compared to risks assumed by investing in the stock market or cryptocurrencies, there’s no comparison. Real estate is generally one of the safest investments, can yield higher returns over other asset classes; it’s a great option for those who are more risk-averse and fearful of volatility.
Elie Rieder
Castle Lanterra Properties
One Executive Blvd, Suite 204
Suffern, NY 10901
212-201-8055
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