Real Estate Investing: How to Build Generational Wealth

Any type of asset that families pass on to their offspring or grandkids is referred to as generational wealth, and it all starts with an individual. Someone in the history of that family – the family founder – took steps during their lifetime to acquire a lot of wealth. They also created the safe transmission mechanism of that wealth to successive generations of their children.

All generational wealth begins as personal wealth, but not all personal wealth makes the transition into generational wealth. Most people do not take the steps required to build that wealth for many reasons, including lifestyle choices. Sometimes, a family member has taken steps to do so, but the next of kin who acquire that wealth does not manage it well—resulting in a loss.

Individuals whose personal wealth becomes generational take conscious steps to ensure they can control their wealth after passing. Some create systems to protect the assets from their children’s financial indiscretions to ensure they preserve the benefits of that wealth for their heirs.

 

Building generational wealth through real estate investing

The process of building generational wealth begins with one individual who is determined to find a way to solve their financial problems and the financial problems of their descendants for hundreds of years into the future. You can be that individual for your family.

To start building generational wealth, you must first find a way to build personal wealth. To create personal wealth, you need to be able to make a lot of money safely within a relatively short time. Which wealth-building activity has the most potential to let you do this?

 

Why real estate?

Real estate investment is the time-tested and most reliable way to build wealth in the shortest time, says Upkeep Media Inc. It is not buying stocks, bonds, cryptocurrency, gold, or other assets. Real estate is the first investment you should consider if you are serious about building wealth that will outlast you to impact your descendants. Here is why.

1. Leverage

If you put $100,000 of your money in stocks, you have exactly $100,000 in value at the time of purchase. But if you put that $100,000 into a $500,000 property, you now have an investment with a value of $500,000. Imagine those two assets double their value after ten years, the stocks will be worth $200,000, but the property will be $1 million. By investing in real estate, you have effectively taken $100,000 and turned it into one million dollars. This is how leverage works in real estate investing. No other investment offers the leverage available to you by buying properties. With real estate investment, you build wealth using other people’s money.

2. Renters help pay the mortgage

Leverage isn’t the only reason owning real estate is the perfect investment for building generational wealth. The other great thing about real estate is that the rent from the property provides sufficient monthly revenue to cover the mortgage payments and all other expenses.

3. Tax deductions

Another good reason for using real estate as your preferred method of building generational wealth is the tax deductions. The government allows landlords to make tax deductions on a long list of expenses on their rental property. These deductions are exclusive to property investments.

 

Strategies for building wealth through real estate investing

Not all property investment strategies are suitable for building generational wealth. Some real estate investment strategies attract high taxes, which makes it difficult to build wealth rapidly. The best real estate strategy for building generational wealth is to buy a property and hold it for a long time.

To do this successfully, you need to understand these things:

A. Finding a property in the right location

It is crucial that you are very intentional about selecting the location where you purchase a property. The best locations are those places where demand for your rental is high, and there is the possibility of the asset doubling its value in 10 years. Finding a rental property in good condition, in the right location, and selling at the right price is almost half the work.

B. Scaling your portfolio of rental properties quickly

You should also know how to grow your portfolio from a single rental to multiple properties. There are many strategies you can employ to achieve this goal. A lot depends on the properties you intend to buy and the financing options available.

C. When to pay off your properties

You must know when to pay off your properties versus when to keep using leverage. With the knowledge that the goal is to have as many properties as possible fully paid for (free and clear), paying off the mortgage is recommended. But you should also know how to balance this with your use of leverage.

 

People who have wealth that passes down through the generations make a conscious effort to keep their riches in the family when they pass away. The tried-and-true, most reliable approach to quickly accumulating riches is through real estate investment.