Key Details:
- According to a recent Zillow survey, over half of Millennial (55%) and Gen Z (51%) homebuyers find it very important that the home they purchase has potential for rental income—either partial (while living in it) or full.
- Of all racial groups, Latinx homebuyers are most inclined to rent out part of their homes.
The potential for rental income has become more important for all generations, but especially the younger ones—Millennials and Gen Z—who often find it more difficult to afford a down payment and a typical mortgage in today’s market.
If they can rent out part or all of a home they’ve purchased to bring in extra cash, suddenly their monthly expenses become significantly more affordable.
A recent Zillow survey shows over half of Millennial (55%) and Gen Z (51%) homebuyers prioritize rentability in a new home purchase. Compare that to 39% of all homebuyers—which has climbed 8 percentage points over the past couple of years.
Of all racial groups, LatinX homebuyers are most inclined to rent out part of their homes.
Younger homebuyers — mostly Gen Z and Millennials — are especially into the idea of rental income as a key factor in their home buying decisions. For those first-time buyers navigating the ‘side hustle culture,’ where a regular 9-to-5 might not quite cut it for homeownership dreams, rental income can step in to help with mortgage qualification and smoothing out those monthly payments.
LatinX Households Most Likely to Seek Rental Income Potential
Zillow’s survey also highlights the disproportionate impact of record-low unaffordability on households of color, while also driving home the point that buyers are still determined to own a home, despite less than ideal market conditions.
More than any other racial group, Latinx homebuyers are prioritizing the potential for rental income, with 51% indicating an interest in renting part of their home to increase their monthly income while living in it. That’s compared to 46% of Black buyers and 40% of white buyers.
Read the full report for more details.
Takeaways for real estate agents
The growing interest in house hacking—especially among younger buyers and households of color—underscores the determination of prospective homebuyers, despite record-breaking unaffordability and its outsized impact on these buyers.
Keep this in mind when discussing housing options with your buyers. Ask them whether they’re planning to rent out part of the home they purchase—or if they’re looking for a home with a lot size large enough to accommodate an additional structure for renting out.
Buyers may find neighborhoods with an easy commute to colleges and popular job centers especially attractive for their renting potential. Neighborhoods with a significant share of NIMBY homeowners may not be as welcoming to these buyers (or to their renters).
Guest host Tre Serrano discussed the impact of NIMBYism on housing inventory on Monday’s Hot Sheet. It’s also worth keeping in mind that different metro areas have different laws pertaining to short-term rentals.
Get to know your buyers well enough to identify the homes and neighborhoods best suited to their plans.
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