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Building Generational Wealth by Buying Real Estate

“I want my children to have the things I did not have growing up.”

Regardless of how different they are, the strata of society they occupy, and the geography they live in, this single sentiment dominates most parents’ minds when they think of their children. Nearly all of us want to give our children those things that will make their lives better than ours.

But here are some questions to ask yourself. Did your own parents have those same thoughts? Did they also have the desire to give you a better life? Do you think their parents had those thoughts too? The correct answer to these questions is yes.

Now, think about this; if most parents and grandparents want to give their children a head-start, why do most people have to start building their wealth from the ground up? Why don’t those parental aspirations materialize into a better life for the children?


There are three reasons:

  1. Most people don’t know how to build wealth from passive income. Throughout their lives, they are stuck with a wealth-creation formula that forces them to exchange their time for money. To increase their earnings, they must work harder. If they ever stop working, they also stop earning.
  2. Even when people earn more money, they do not know how to protect that wealth. Most people spend any extra income on lifestyle inflation instead of income-generating assets. They do this because they need more financial literacy to build wealth.
  3. There is a vast difference between the skills required to make money and those needed to transmit that wealth to your descendants. A financially literate person can manage their wealth while alive, but how do they protect those assets when they are gone?

Shot of reading glasses on top of a notepad and a laptop on a deskThis is why most people’s desire to give their children a better life never happens. To make your children’s lives better than your own, you must first learn to build generational wealth. What is generational wealth, and how do you start to build it?


Generational wealth and how to build it

Generational wealth is anything of monetary value passed from one generation to another. It is often created or acquired by one individual and then bequeathed to their heirs. Generational wealth can be intellectual property, stocks, art pieces, real estate, or a business.

Although there are many ways to build wealth to transfer it to your descendants, we will focus on real estate in this post. Why is real estate used by the wealthiest families in the world as the most reliable way to hold and transmit their wealth?


1.    Land and property are tangible assets

When you invest in real estate, there is no risk that you will wake up one day and find that your assets have evaporated (barring war or natural disaster). But this can happen with stocks; they will become useless if the company stops operating.


2.    Land has a limited supply

Hand holding a model house above green meadow.New land is not being created, but more people are being born daily. This means that land supply is continually shrinking while its value constantly climbs. Additionally, while a company may lose the demand for its products, the land will always be in fashion because it is a basic human need.


3.    Real estate investments retain their value

Real estate is not as vulnerable to economic shocks as other assets are. The value of a stock can fall from several hundred dollars to a few cents within weeks. But changes in the value of real estate move more slowly. Also, even if real estate values fall in the short term, they always appreciate in the long term.


4.    Real estate is a source of passive income

You do not have to sell your real estate investments to make money from them. Even though you can earn dividends from stocks, the returns on investment are higher with rental properties because the rental income from real estate is more stable and can be pretty substantial.

Furthermore, you can transform your real estate investment into a passive source of income when you hire a property manager to handle it.

This last point is the key that transforms a property investment into an asset that yields income across multiple generations of one family. Those assets must be managed safely and profitably for your children to benefit from your property investments.

But you need to be sure that your heirs will have the skills or interest to do this effectively. This is why professional property managers and financial planners are the two bedrock of any generational wealth strategy. With experienced property managers and financial planners, you:

  • Allow your real estate investments to become genuinely passive.
  • Build a generational wealth strategy that doesn’t depend on the abilities of your heirs.
  • Ensure that your assets continue to grow even after your passing.

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