When financial advisors and business gurus talk about generational wealth, they usually point to the Hiltons and the Rockefellers as examples, whose smart money moves have benefited their heirs for decades. In contrast, the Vanderbilts, known for extravagant parties and steadily declining wealth, are brought up as a cautionary tale of bad long-term money management. These extreme examples are not exactly realistic for most, but they illustrate how smart financial decisions such as investing in real estate can benefit families for many generations, while poor planning can leave a family with much less than they originally had.
Understanding generational wealth
Having generational wealth is when a person’s accumulated assets are passed down, and the assets continue to grow or remain stable over the years. This allows generations to benefit from the stability of guaranteed housing, security of appreciable assets, and additional cash flow opportunities, particularly from rental properties. While there are many ways to grow your money, many investments are risky or unsustainable. If you’re looking for ways to build equity over time, it’s time to start thinking about investing in real estate.
Real estate as a long-term investment
As the housing market becomes increasingly competitive for buyers, purchasing a house now can be a smart way to secure long-term equity and provide housing security for your family. Between tax breaks and a steady growth in property values, simply having a single family home for the first time can be life-changing for many, especially in a country that has historically excluded minorities from the housing market. If you are looking to grow your wealth beyond a single family home, you may wish to consider including a rental property in your real estate portfolio, which can create lucrative cash flow opportunities. Regardless of whether you are a first-time home buyer or a last-time home seller, it’s a good idea to meet with your realtor and financial advisor to determine your current buying power and any potential opportunities that could benefit your children and future generations.
Setting beneficiaries up for success
Investing in real estate now is one thing, but looking ahead to how your investment portfolio will be managed in the future is another beast entirely. There are many difficult aspects to consider when it comes to planning for one’s passing, and deciding how your beneficiaries will take over your finances after you’re gone is no exception. It can be uncomfortable to think about, but there are simple steps you can take, such as including your family in discussions about investment decisions to improve their financial understanding, while hiring a property manager may make the most sense for maintaining a rental property long-term. When looking to build generational wealth, consider what steps you are able to take now that will allow your grandkids’ grandkids to thrive.
By Jennifer Egbert. Jennifer is an award-winning Realtor® with over 20 years of experience. Jennifer is a licensed residential agent and the leading expert in Boulder Luxury neighborhoods, the best builders, and most current market conditions. To learn more, visit www.jenniferegbert.com.