Multi-generational homes remain a hot commodity today. As a matter of fact, for the past two decades, the number of multi-generational homes has been rising significantly. Between 1980 and 2012, the number of Americans living in multi-generational households has doubled, amounting to 57 million. For many, the reason for living in a multi-generational home is economic. While for others, their reasons are more cultural than they are financial.
If you are a real estate investor debating which type of rental property out there is for you, investing in a multi-generational home might just be a good choice for your investment goals. Before we delve further and provide you with a list of the best cities to invest in real estate of this kind, let’s define what these houses are.
What Is a Multi-Generational Home?
Multi-generational homes, according to the U.S. Census Bureau, are those consisting of more than two generations living under the same roof. Moreover, locations with a high cost of living, large immigrant populations, and housing shortages tend to have a higher number of multi-generational homes, according to the US Census Bureau American Community Survey.
When studying multi-generational housing, a real estate investor must understand the needs of the people residing in these rental properties. Multi-generational homes fall under several categories and as a real estate investor, it is crucial to know which category you aim to cater to. Among the several types of multi-generational homes, the three most common types are the three-generation homes, two-adult generation homes, and four-generation homes. Get to know each type thoroughly and set your rental strategy accordingly.
What to Consider When Looking for a Multi-Generational Home for Real Estate Investing
When you are investing in multi-generational homes, you want to learn about the needs and requirements of such families. This is because the type of multi-generational home determines the shape and size of the investment property. After all, you do not want to have to remodel your investment property entirely to meet the demand of these tenants. To avoid making major design adjustments, we have compiled the characteristics that you should consider when looking for such real estate investment opportunities.
- Open Access: Most importantly, your multi-generational home should have open access for every generation residing under it. You might want to consider wider hallways and doors to accommodate for wheelchair and walker access. You might also want to consider childproof locks on cabinets and stairwells.
- Master Bedroom Adjustment: Multi-generational homes tend to have more than one couple residing in the house. Therefore, as a real estate investor, you might want to consider an investment property with more master suites.
- Privacy: Privacy is a top feature that many multi-generational families look for. Master suites are ideally placed in different parts of the home. Also, for seniors or those with disabilities, consider having a master suite on the first floor of the house.
- Location Location Location: Finally, as we always emphasize, the location of the rental property will break it or make it for your investment opportunity. You want a location to accommodate the different types of people residing in the rental property. For example, consider locations where the schooling system is good for children and one that provides a good fit for millennials that commute back and forth to work.
What Are the Best US Cities for Multi-Generational Homes?
You may be thinking, “How can I find multi-generational homes for sale near me?” To find real estate investments as such can be a bit complex. However, with our guide, we have come to assist you. Below is a list of the top four US cities for multi-generational homes. (All of the data below is provided by Mashvisor’s investment property calculator)
Honolulu has one of the highest shares of multi-generational homes in the US, compromising of 3.82% of all households. Studies have shown the high demand for this type of property here is due to housing costs and cultural traditions. Therefore, as a real estate investor investing in multi-generational housing in Honolulu, you should consider a monthly rent that is competitive with the local market, yet one that generates positive cash flow.
- Median Property Price: $921,207
- Traditional Rental Income: $2,714
- Traditional Cash on Cash Return: 3%
- Days on the Market: 99
- Price-to-Rent Ratio: 29
Grand Prairie, TX
Grand Prairie is also one of the top cities with the highest number of multi-generational households, compromising of about 4.89%. The high share of multi-generational households in Grand Prairie can be attributed to the relatively high population of Hispanic communities, compromising of about 42.7% of the population because (according to the American Community Survey) the high immigrant population contributes to the high number of multi-generational homes. One explanation is that Hispanic communities tend to have many generations living under the same roof due to cultural traditions. According to experts in Texas real estate, the rising home purchase prices accompanied by increasing apartment rents have also encouraged many to live in a multi-generational home setting. This has vis-à-vis urged real estate investors to explore such investment opportunities in the city.
- Median Property Price: $239,898
- Traditional Rental Income: $1,450
- Traditional Cash on Cash Return: 6%
- Days on the Market: 53
- Price-to-Rent Ratio: 78
Aurora, CO is a hot city with plentiful economic opportunities. The city has been ranked in the top five of the Best Cities for Living the American Dream. Unemployment rates are as low as 3.1% and the median income is $53,000. Particularly, Aurora is a hot market for multi-generational homes as it also contains one of the most shares across all states. About 4.33% of households are multi-generational homes. With house prices hovering above the national median (as shown below), it makes sense that many would gravitate towards multi-generational homes, driving the demand.
- Median Property Price: $430,025
- Traditional Rental Income: $2,083
- Traditional Cash on Cash Return: 2%
- Days on the Market: 53
- Price-to-Rent Ratio: 17
According to real estate market research, Norwalk, CA has the third highest percentage of multi-generational households in the United States. About 10.1% of all households in Norwalk are multi-generational homes. With a population of over 100,000, Norwalk is home to many of the Hispanic communities that continue to drive the multi-generational house trend. About 11.1% of renter-occupied housing is being overcrowded and such can be contributed to dense Hispanic communities that continue to congregate within Norwalk. Having drawn such analysis, investing in a multi-generational rental property in Norwalk can bring about high returns and is worthy of further investigation.
- Median Property Price: $493,493
- Traditional Rental Income: $2,117
- Traditional Cash on Cash Return: 1%
- Days on the Market: 64
- Price-to-Rent Ratio: 19
Multi-generational housing has become more widely abundant than it was in previous decades. The large influx of immigrants into the US explains the trend to an extent. Moreover, and given the recent economic crisis, many have resorted to living with their parents to avoid incurring more financial obligations and therefore counteracting the impact the economic crisis has had on them. Therefore, for real estate investors, seeking the opportunity to invest in multi-generational homes makes a viable option today. We recommend that you look into the aforementioned cities as they make a good investment environment for multi-generational home investing. To learn more about the real estate market and derive the latest and most accurate data, visit Mashvisor!