Invest Smart: Finding Opportunities in Real Estate in 55+ Communities By Steven Miszkowicz, CISP

The real estate market feels like it’s on hiatus as investors wait for lower interest rates and increased inventory in the market. Many real estate investors wonder if the Fed will maintain the current high interest rates to fight inflation and make them the new baseline. How long will this pause last, and does real estate still offer good investment potential?

There are still opportunities to be found for those seeking them in the real estate market. Along with workforce housing, niches in the market like retirement properties can offer an attractive investment opportunity.?

This is the second article in our series focusing on niches within the current residential and commercial real estate markets, exploring why investing in retirement properties is a potentially lucrative opportunity worth exploring in your self-directed Individual Retirement Account (SDIRA).

The Current Impact of Baby Boomers

According to the latest U.S. Census in 2020, the post-World War II Baby Boomer population stood at over 73 million. The Boomer generation is aging, and by 2030, all Boomers will be 65 or older. Many Boomers are healthy, active, and in a strong financial position to enjoy life while they have their health.

Historically, Baby Boomers have been the generation of the elephant trying to push itself through the eye of the needle — everything this generation does and has done is impactful. True to form, this “gray tsunami” of aging Boomers is causing a demographic shift that is being felt in many sectors of the economy.?

The Job Market

As Boomers reach retirement age in significant numbers, you might expect a flood of job openings as they leave their long-held positions. However, the exact impact is more complex than it appears.?

Many Boomers are postponing their retirement, either to build additional financial security or because they find their work fulfilling and enjoyable. This delay keeps positions filled for longer periods, limiting the availability of jobs for younger workers.

Additionally, when Boomers do retire, there is a skills gap in the workforce, making it difficult to find adequately qualified replacements. This scenario leads to a tight job market as companies struggle to fill roles that require specific expertise, thereby intensifying the competition.?

The Housing Market

If you speak to any Gen-Xer or Millennial, they can tell you about their frustration in buying a home with the current lack of inventory. Boomers are playing a large role in this scarcity of the housing market, as they’re choosing to stay put in their current homes in their retirement years.

Why aren’t Boomers moving or downsizing??

One big influence is the prolonged period of low interest rates in the last decade. These favorable rates have enabled Boomers to either pay off their mortgages or significantly reduce their principal balance. Many Boomers find themselves in a comfortable position, eliminating the urgency or need to move for financial reasons alone.

Boomers are also choosing to remain in place because of their attachment to their communities. While some have flown to warmer Sunbelt towns, the majority want to remain within their communities and stay close to family and friends.

Lastly, there is a lack of preferred 55+ housing outside of buildings specific to those that need assisted living. Healthy Boomers want community-centric retirement properties that support the active, independent, and social lifestyle they’re living.??

Emerging Trends in Retirement Properties

A new trend is emerging with smaller, boutique, age-restricted buildings designed to cater specifically to the needs and preferences of the Boomer demographic. These retirement properties offer a variety of novel on-site amenities and social programming, appealing to healthy, active seniors looking for a place that fits their lifestyle.

Common area kitchens and dining spaces with a coffee bar provide opportunities to socialize and share meals. Some retirement properties enhance their hospitality-style services with fine dining options and custom-designed meals.

Communal indoor/outdoor gathering spaces serve as venues for events and recreational activities, and fitness and wellness centers are available for residents to promote their well-being. There may also be garden plots available to residents to pursue their hobbies.?

These amenities not only enhance the quality of life for 55+ residents but also create a sense of community and belonging. The added value is instrumental in attracting Boomers to these communities and distinctly differentiates them from traditional senior housing options.

Opportunities for Real Estate Developers

The growing demand for 55+ communities and the shift towards more tailored amenities offer significant opportunities for real estate developers.

Developers can capitalize on this trend in retirement properties by designing and building age-restricted properties that offer a mix of modern amenities, recreational options, and community-focused common spaces.

By understanding what Boomers are looking for in the next phase of their lives, developers can create highly desirable communities that cater to this demographic segment.

Why Invest in Retirement Properties?

Retirement properties like 55+ communities present a compelling investment avenue for several reasons:

1. Demographic Trends: The “gray tsunami” is a significant demographic trend. As Boomers continue to retire and seek lifestyle-oriented housing solutions, the need for age-restricted communities is expected to grow substantially.

1. Consistent Demand: 55+ communities often have stable and consistent demand. Boomers are known for their strong financial position and wealth accumulation, and they’re willing to invest in quality housing that caters to their desires for amenities, community, and convenience.

1. Resilience to Economic Cycles: The demand for retirement housing is generally resilient to economic cycles, as seniors prioritize housing stability even in economic downturns. Investments in retirement properties are typically less susceptible to market fluctuations than other real estate sectors.

1. Stable Income: Retirement properties offer a strong rental market. As Boomers downsize and transition to maintenance-free 55+ communities, rental units in these properties will become highly sought after. This can translate into stable rental income and longer tenant occupancy.

1. Long-Term Appreciation Potential: Investing in well-planned and strategically located retirement properties can offer long-term capital appreciation potential. As 55+ communities become established and gain reputation through word of mouth among retirees and active seniors, increasing property values.

1. Diversification: Including retirement properties in your real estate portfolio offers the benefit of diversification. By investing across different property types, you can mitigate risk, capitalize on market dynamics, and enhance the resilience of your portfolio.

How Chicago Trust Administration Services Can Help

The niche opportunities available in the real estate market continue to evolve and are being driven in part by the preferences and needs of the Boomer generation. The rise of retirement properties such as 55+ communities presents a unique opportunity for investors looking to capitalize on the shifting demographics of an aging population.

Investing in retirement properties can be a lucrative opportunity, but make sure to do your homework and due diligence:

• Market Research: Research the market trends and demand for retirement properties in your target area. Understand demographic shifts, housing preferences, and the competitive landscape. Analyze factors like population growth, income levels, and lifestyle trends among retirees.

• Property Analysis: Evaluate potential properties within 55+ communities thoroughly. Consider location, amenities, property management quality, and overall condition. Assess the potential for rental income or resale value based on market demand and comparable property prices.

• Future Growth Potential: Assess the long-term growth potential of the retirement property and surrounding area. Are there other planned developments, infrastructure projects, or other economic indicators that could impact property values and demand over time?

By thoroughly understanding the opportunities and risks involved, you can make informed decisions and maximize the potential of your investments.

At Chicago Trust Administration Services, we’ll help you take advantage of niche real estate investment opportunities including retirement properties in your self-directed IRA portfolio. Our knowledge and expertise will provide you with the regulatory guidance and compliance necessary for investing in alternative assets like real estate in your SDIRA.

To see how we can help, we invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing [email protected].

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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.