Generation X now holds most of the wealth in the US. How has this shift of wealth changed? What does it mean for real estate investors?

For years many have been proclaiming how important it is for real estate professionals to be marketing to millennials and even Gen Z. Others have focused hard on Boomers and their parents. It is true that Gen X was among, if not the hardest hit in the 2008 financial crisis. Now everything seems to have changed.

Rapid Wealth Growth

The big headline last year was how the world’s billionaires grew their wealth by around 50%, or $4T within just months of COVID restrictions beginning.

Now the latest data shows that Gen X has also been a huge beneficiary over the past two years. They’ve seen their net worth rise by 50%, and now control more wealth than any other generation.

Gen X households now control more wealth than boomers. While just 5% of the nation’s wealth is in the hands and accounts of millennials.

While many in the US reportedly lost all of their savings during COVID lockdowns, Gen X has not only recovered from the previous financial crisis, but appear to have learned to thrive through crises.

Both inheritances and the appreciation of their wealth through real estate has certainly helped. The current outlook should mean an even greater wealth transfer to this generation.

What It Means For Investors

There are three big takeaways for real estate investors from this new data.

The first is who now has the capital to invest. If you are raising capital in addition to financing properties, then Gen X is likely to have the largest pool of investable capital.

Second is who is buying properties. Gen X may also be selling inherited properties and old homes as they move up or migrate. Though they also now appear to be the strongest group of buyers of investment properties.

Thirdly, it follows that real estate investors and businesses should be positioning and marketing to Generation X. This may require some revamping of strategies in terms of the homes you are making offers on, the rehabs done, and the platforms that you advertise on, as well as the language you use in your marketing. Yet, making these key adjustments now could make all the difference in your own level of success and wealth.

 

Check out these evolving trends in real estate…

Understand how these changes are influencing the market, creating opportunities, and how you can invest to benefit from them.

Taxes, Taxes, Taxes

We already seem to be in a year of unprecedented tax hikes, the addition of new taxes, the stripping away of long used breaks and deductions, and proposed taxes.

One of the most notable of these new tax proposals has been the targeting of tax saving retirement accounts, including IRAs. Now, despite saying it won’t cost anything to pay for the new $3.5T spending bill, the government is proposing a new tax on unrealized gains.

That means you would pay taxes each year on the increased value of assets. While the ruling is still very cloudy, that would take away the interest or advantage into holding onto homes, retirement savings invested in long term hold real estate, stocks and even precious metals.

It may mean more cash being spent in the economy in the short term. Further supporting price growth. If you are going to pay the taxes each year anyway, then turning around house flips fast for lump sum gains just seems to make more sense.

Extreme Inflation

Hyper inflation seems unlikely to subside anytime soon. This certainly applies to construction materials and labor. Materials are costing even more due to shortages, increased delivery costs, and gas prices. Hyper inflation in gas and daily living expenses means construction workers need to get paid a lot more to justify going to work every day too.

This means the market favors real estate wholesalers far more than rehab flippers and house builders.

Soaring House Prices & Deep Discounts

If you haven’t noticed, the real estate market is in a really weird place too. In some cases house prices are up almost 100% year over year. In others oversupply means desperate owners and builders who are offering extreme discounts. Even though rents there may also be rising by 70% or more each year.

Financial Leverage

Real estate investment businesses and funds are trying to leverage even more capital now to take advantage of all of the opportunities out there, and to benefit from extremely low interest rates. Traditional mortgages may be virtually dead right now, but there is a ton of investment capital ready to be deployed.

Many real estate investors seem to be trying to create ‘pitch decks’ to raise capital like they see tech startups doing. Yet, few really understand what a modern pitch deck should look like, and how a good fundraising process is run.

With transactional funding wholesalers can skip all the hassles of borrowing and raising capital, optimize their leverage fast, and sell for cash quickly to those that have it.