How the Rich Create Generational Wealth Through Real Estate

Today, we want to discuss that all-important desire that, once in a while, enters the mind of anyone serious about building wealth. We want to discuss creating generational wealth – a store of wealth that survives you, your heirs, and their heirs.

If you are like us, you would have wondered how those families whose names never fail to make it to the list of the world’s wealthiest people manage to do it. We all know that if there is one thing harder than making money, it is finding a way to keep the money after you are gone.

As a rule, almost 70% of people who make money in their lifetime may not pass it down to their children. Of the few who leave their wealth to their successors, their children usually lose that wealth before their grandchildren reach adulthood.

But there is a minority of families that do it differently. What do families whose wealth endures through many generations know that the rest of us don’t? Can we peek into their playbook to see the methods they use and perhaps implement those methods in our attempts to build wealth?

Thankfully, the answer is yes. In this post, we highlight many crucial strategies you can use for building a store of resources that will serve you during your retirement and beyond. The techniques in this post will focus on wealth-building using real estate.

How to create generational wealth using real estate

Real estate is not the only way to create generational wealth. But of all the methods you can use to reach this goal, real estate investing is the most tested, stable, accessible, and widely-used strategy for building generational wealth used by the rich.

Here is how they do it:

1. Positive cash flow

Positive cash flow is the foundation of your efforts to use real estate as the basis for building generational wealth. Cash flow makes it possible to earn income from an investment without liquidating the asset. An investment property generates cash flow in the form of rental income.

Here is a glossary of property investment terms to help you learn more about cash flow and other investment terms.

For a property to be a good investment, the cash flow should be enough to cover the operational costs (mortgage, interests, insurance, professional fees, maintenance, wages, etc.) and still leave enough money to let you declare a profit every month.

The bulk of your effort when deciding what kind of property to buy and where to buy it should be on finding investments that promise the most cash flow most safely and consistently. Half of the work is completed if you can find these assets.

2. Professional property management

The second key to building generational wealth through real estate investing is to have professional management for your real estate investments. Property investors often think they save money when they manage their properties by themselves, but this is a short-term strategy.

Firstly, when you manage your property investments by yourself, you limit your opportunities. You will only be able to invest in those real estate markets close to you. But hiring property managers will let you buy assets in any part of the world.

Secondly, since you have limited time and energy, you can only manage a few properties at the moment. Getting professional managers for your investment properties means there is no limit to the number of assets you can own at any time.

3. Using leverage and equity intelligently

You must know how to use the built-up equity in your properties and other people’s money (bank loans) to quickly scale your portfolio of rental properties. Your goal in the first one or two decades of investing should not be to take profits but to accelerate the growth of your portfolio.

Two of the tested methods you can employ to achieve this include;

• Buy rental properties as an owner-occupier to get easier mortgage terms.
• Use your properties as security to finance the purchase of new rental properties. You may also employ diverse property investment vehicles.

4. Estate planning and wealth managers

As much as possible, you want to separate your wealth’s stability and growth from the personal abilities of you or your heirs. You don’t need the survival of those assets to depend on the financial sense of your successors. The power to administer the wealth should never be in the hands of your heirs.

The number one reason that wealth does not survive past the third generation is because of the wrong decisions of those who inherit that wealth. You can protect your wealth by creating an estate plan and appointing professional administrators who will manage that wealth on behalf of those who inherit it.