How is it that for most people, each new generation of the family must start its financial journey from the very beginning? Just as their parents did before them, the children also need a loan to go to college, they have to get a 30-year mortgage before they can own their own home, and if they want to start a business, they must save up for it.
Yet, for other families, it is different. The parents’ or grandparents’ hard work and wealth give the kids a head-start in life. The children don’t need to worry about college; a trust fund was set up for that purpose before birth. They don’t need a mortgage to buy a home since they inherit property from their family.
Even more interesting, many families in this second category do not have billionaires in their ancestry. They are not like the Fords or Rockefellers; most are ordinary people who have found a way to accumulate a decent amount of wealth in their lifetime. They have also devised strategies to retain that wealth and pass it on to their heirs.
How do these everyday people, who are not much different from you, achieve these results? Is there a template they follow to reach these outstanding outcomes? If there is a template, is it accessible to others? Is there a chance that you can also start to build a foundation of generational wealth for your own family?
The answer to these questions is a resounding yes. In the words of Jason Fried, “…making money takes practice, just like playing the piano takes practice. No one expects anyone to be any good at the piano unless they’ve put in lots of practice. Same with making money. The more you practice, the better you get…”
But just as making money is a skill you develop with practice, keeping the money you make is also a skill. Many people make money during their lifetime, but only a fraction is retained. Why?
- Most people lack financial intelligence. When they make more money, that money goes into lifestyle inflation rather than buying wealth-building assets.
- Most people lack self-discipline. Because their life lacks a clear focus, they occasionally practice the habits of wealth or when it is almost too late – close to or after retirement.
- They don’t teach financial literacy to their children. The result is that even if they manage to leave an inheritance to the children, those assets are mismanaged and soon lost.
What can you do to change these? In the following paragraphs, you will find the steps to build generational wealth for your family. This process begins with acquiring assets beyond your and your children’s lifetime. The primary asset we will discuss is real estate – rental properties specifically.
Building generational wealth through real estate investing
Everyone loves the idea of owning wealth that allows them to live a full life in retirement and endures through the lives of their children and grandchildren. Buying safe, secure, and appreciating assets is the key to that kind of wealth. Although many assets meet this criterion, the most accessible is real estate.
How to invest in real estate for generational wealth
1. Create a wealth planning blueprint
A professional wealth planner helps you craft a lifestyle in harmony with your stated financial goals. They break down your broad financial objectives into actionable steps that are easy to implement immediately.
2. Invest in real estate for the long-term
There are two strategies for investing in real estate: long-term and short-term. A short-term system requires more work and is unsuitable for building generational wealth. Buy property and plan to hold it for a long time.
3. Buy rental properties for cash flow
The properties you buy must be in a good location with steady demand. That way, screening tenants will be more accessible for you. Also, the rent from the property must be high enough to let you have some money left over after you have covered the expenses for the rental.
4. Buy rental properties that appreciate in value
The value of real estate always goes up in the long term; this increase in value is known as appreciation. After cash flow from rents, value appreciation is the second way you make money from a rental property.
5. Increase your portfolio
Owning a few rental properties will not make you a millionaire. But twenty or more properties will undoubtedly make you a millionaire. These properties should generate steady income, and you should strive to pay off your mortgage.
6. Hire a professional property manager
For your real estate portfolio to grow, you need professional property management. Hiring a property manager ensures that the size of your portfolio is unlimited by your time and expertise. With a property manager, you can comfortably invest in properties even if they are far from your location.
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