When I first heard about baby boomer housing boomtowns, I resolved to stay as far away as possible. As a member of Generation X, I didn't see any sense in investing in real estate in the housing boomtowns that are currently being created by 75 million baby boomers. It's not just that I don't like the boomer generation. It's also the fact that the increase in home values may not continue beyond this past year's bounce. Still, I wanted to contemplate whether I should buy real estate to rent out to boomers now and possibly use the property as my retirement home later. According to a recent article by The Street, boomers are creating a new cycle of growth in housing that can't be ignored.
Having boomers for tenants
A recent report by RealtyTrac cited in the article, showed among the 40 cities in the nation with at least 33 percent of the elderly population, 25 posted increases in median home prices and 27 percent had positive capitalization rate. The rate indicates a positive cash flow for rental properties in those markets. Many real estate experts believe there will be a lot of demand for rentals since some boomers lost their homes to foreclosure during the housing crisis. Others just don't want to be tied down to a mortgage.
Flocking to Florida
For years, the buzz was that boomers were just too unique to do anything as predictable and ordinary and moving to Florida to retire. However, six of the top 15 best retirement hot spots are in Florida. My first rule is to never invest in property unless I know the town well. I'd be open to investing real estate in Naples, Fort Myers, Punta Gorda or Venice, Florida because I've visited all of those communities. I have relatives who have been successful with rental properties in the Fort Meyers area.
Avoiding age-restricted towns
My second rule is to avoid any age-restricted communities. Not only does it limit who can live in the house, but the closed communities are often notorious for being over-controlling. I only live about 10 minutes away from one of the Florida towns that made the top 15 list. Having spent a lot of time visiting people in the 55-and-older community, I can honestly say it's the last place I'd want to live or own investments. I wouldn't want to headaches of worrying about whether the home owner associations and community boards would complain about the grass being a centimeter too long.
I think investing in boomer boomtowns is a good idea from a short-term perspective. It's my opinion that the median sales prices will rise in the next few years. However, from a long-term perspective, it's a terrible idea. Older boomers will probably come out ahead as they sell their houses to younger boomers or others, but the rest are investing in future ghost towns. As boomers shift into assisted living, nursing homes or graveyards, there will be a huge inventory in these housing boomtowns. But for me, the decision is simple. I just don't want the hassle of having boomers as tenants. I especially don't want to deal with the many rules and regulations of age-restricted communities. I'll check out the boomtowns when they become ghost towns and the prices are dirt cheap.
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