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Multifamily Wealth – Riding The Demographic Wave

By September 24, 2014 April 11th, 2019 No Comments

I love demographics.

You should too.

In a nutshell, demographics is the study of people and populations. If you understand people, you can understand their consumption habits and predict the future with reasonably good certainty.

Given my interest in demographics, a reader of NestEggRx suggested I read the book “The Age Curve: How to Profit from the Coming Demographic Storm” by Kenneth W. Gronbach. This post will be a review of sorts of this fantastic book as well as a discussion of current and future demographics. I will discuss how these demographics are affecting both physicians and commercial multifamily real estate investors.

Let’s start by defining the three most relevant generations that you should be aware of:

  • Baby Boomers (born 1945 to 1964) – 78 million strong
  • Generation X (born 1965 to 1984) – only 69 million
  • Generation Y or Echo Boomers or Millennials (born 1985 to 2010) – a whopping 100 million

In my world, my wife and I are Gen Xers while our parents are Baby Boomers and our children are Millennials. Why is this important? It is important because people affect economics.

Do you notice a pattern in the three generations above?

Gronbach repeatedly points out the size of the Gen X in comparison to the size of the other two. Gen X is 11% smaller than the Baby Boomers and sandwiched between two behemoths.

What does this mean for physicians and other health care workers?

Due to their relatively small size in comparison to the Baby Boomers, Gronbach notes that Generation X:

  • Will not be able to compensate for Boomers; health care costs
  • Will not be able to sustain social security
  • Will not be able to pay enough taxes to run the local, state, and federal governments when it is their turn to carry the tax burden

Is it any wonder that health care is such a mess? It is depressing to think that as the massive Baby Boomer generation ages and requires more health care, physicians will be saddled with decreasing reimbursements, decreasing autonomy, more regulation, and ultimately decreased job satisfaction. These vain attempts to lower costs are doomed given the size mismatch between the Baby Boomers and Generation X.

The news is not all bad, however. There are financial implications that could make your portfolio sing.

As a marketer and demographer, Gronbach frequently focuses on economic issues. He reminds the reader of the universal truth that supply and demand is everything. Then on page 166 he makes a simple but profound statement, “marketers should watch for the market that’s increasing in size, not the one getting smaller..”

“Only the Baby Boomer Generation and Generation Y are delivering future expanding markets.”

That statement is so profound that you really should read it again!

You see, we physicians have to fund our own retirements. We don’t have fat pensions with free medical and annual cost of living adjustments waiting for us in retirement. Despite this fact, surveys show that the majority of physicians have retirement portfolios that are lagging behind.

The good news is that the real money is in catering to the needs of the Baby Boomers and Generation Y. Guess who the two biggest demographic groups of renters are?

  • 18 to 30 year olds (Generation Y now and for the next 26 years)
  • Over 55 year olds (Baby Boomers now and for the next 30+ years)

As the Baby Boomers retire and look to downsize, they start renting. Statistically speaking, once they sell and rent, they tend to remain renters for the rest of their lives.

As you can see, commercial multifamily real estate is perfectly positioned to cater to the two largest demographic groups this country has ever seen.

P.S. Is your retirement poised to take advantage of the coming demographic storm?

If not, I recommend you do two things – read the “Age Curve” by Kenneth Gronbach and consider investing in commercial multifamily real estate. For those who wish to learn more, pick up your copy of Evidence Based Investing – Why Every Health Care Professional Should Consider Investing in Commercial Multifamily Real Estate.

Want to learn more?

Download your free copy of Evidence Based Investing and learn why it’s a preferred asset class.

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Dennis Bethel

Dennis Bethel

After 18 years of working in the trenches of a broken health care system, Dennis Bethel, M.D. extricated himself from medicine utilizing the power of passive income from real estate. Now he helps others conquer their number one financial fear, cut their biggest expense, and tame the greatest threat to their careers.

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