LOS ANGELES—Millennial investors seem to understand that a well-balanced portfolio shouldn’t just consist of traditional blue-chip equities and bonds, but a variety of asset classes. This generation was, and continues to be, greatly impacted by the Great Recession in several ways. That is according to David Manshoory, the founder and CEO of peer-to-peer real estate lending marketplace AssetAvenue. GlobeSt.com recently caught up with Manshoory, who was recently named one of “Tomorrow’s Leaders” in Southern California real estate by sister publication, Real Estate Forum, on millennial investors, technology and what it all means for the industry
GlobeSt.com: Why do millennial investors love real estate and what does it mean for the industry?
David Manshoory:In a recent survey of high-net-worth investors by US Trust entitled “Insights on Wealth and Worth,” stark contrasts appeared between millennial (or “generation Y”) investors and previous generations regarding a range of issues, including their preference for tangible assets. While 35% of millennial investors said they currently own tangible assets, an additional 46% said they do not currently but are interested in owning them, the highest percentage of any group.
Millennial investors seem to understand that a well-balanced portfolio shouldn’t just consist of traditional blue-chip equities and bonds, but a variety of asset classes. This generation was, and continues to be, greatly impacted by the Great Recession in several ways. Many saw their parents’ and grandparents’ stock portfolios drastically cut, and a significant portion of new graduates had difficulty finding suitable work to pay off mounting student loan debt. I believe this economic turmoil and uncertainty has led millennials to gravitate toward security and caution regarding their finances and investments. While many real estate markets did suffer hits during the Great Recession, this sector is still seen as one of the safest investments and as a huge wealth generator.
GlobeSt.com: How do you think technology is impacting the way this generation invests?
Manshoory:What online brokerages did for investors in the 1990s, investment crowdfunding portals will do for this decade. Crowdfunding technology is helping disrupt traditional models of doing business. The recession hurt everyone’s investment portfolios and drastically shrunk the availability of credit to consumers and businesses. However, it also sparked a response in the market. Lending Club is connecting qualified borrowers with investors, Indiegogo is helping artists and other solicit crowds for donations, and now a new frontier is opening with real estate.
GlobeSt.com: How is crowdfunding specifically changing the real estate investment experience?
Manshoory:Investment crowdfunding platforms have especially taken off since the JOBS Act was passed in 2012, even though not all of them utilize the new rules that allow for the advertisement of private securities. What it has done is create a gold rush of new platforms coming online, catering to a variety of niches and asset classes. Some platforms, like AssetAvenue, focus on debt investments, others on equity and debt, but only in only commercial or residential real estate, and so on. The real estate crowdfunding movement is still in its infancy, but there’s a lot of room to grow. Our experience thus far has been that early adopters are tech-savvy millennials and late gen X-ers who are then influencing their parents to consider investing online as well.
GlobeSt.com: How will millennial investors change real estate investing in the future?
Manshoory:Millennials are the most tech-savvy generation to date and because of that, technological advances will continue to be a crucial component of attracting and retaining these investors. Our generation is much more likely to invest, donate and conduct financial business online; it feels completely normal to us. At the same time, we expect cutting-edge tools at our fingertips, which is why investment platforms like AssetAvenue are continuously thinking of ways to use technology to promote transparency, discussion and education while shrinking the entire process down to as few steps as possible. As this generation of investors’ earning power increases over time, capital will continue to move toward true democratization, depending less on closed-door deals and membership in exclusive networks and more on the quality of the opportunities themselves.
GlobeSt.com: How should millennials educate themselves about real estate investing?
Manshoory:Luckily with all the advancements in technology, the education needed for real estate investing is much more accessible. My advice would be to utilize the incredible resources already assembled and available online to learn about the pillars of real estate investing. This advice really applies to anyone new to real estate investing, particularly if they are considering investing through a crowdfunding platform. No matter which one is chosen, investors should ensure that the founding team has the requisite real estate investment expertise to be offering investments to other investors.
Millennials should also determine what their risk tolerance is based on their current and future financial goals and how to balance out their portfolio. For example, AssetAvenue is a debt-based crowdfunding platform offering more stable returns, while others offer equity investments with good upside potential but higher risk. Our general advice is that investors should spread risk around between a variety of asset classes, property types and locations. They should also look to see that sufficient information is given about the investment to make a completely informed decision.