Creating Generational Wealth through Real Estate
One of the most prevalent motivating factors for investing in anything is the promise of developing generational wealth. While improving your personal net worth might be important to you, you may also have an eye pointed towards the future. Putting your children, grandchildren, loved ones, and other heirs in a position to experience financial security.
Real estate investing is a wonderful tool for investors who are looking for a way to amass generational wealth. There are several reasons that some of the wealthiest people in the world have built their wealth through strategic real estate investing. Understanding what generational wealth is and how real estate can help make it a reality can put you in a better position to set your descendants up for financial success.
What is Generational Wealth?
Before we dive into understanding how real estate can improve generational wealth, we should probably better grasp what generational wealth is. Anyone can leave their heirs something upon their death. A hefty life insurance policy, a healthy savings account, and other assets can certainly improve life for your heirs. However, that isn’t genuinely generational wealth.
Generally speaking, generational wealth is free from encumbrances. The primary point of generational wealth is that your heirs don’t have to do anything to enjoy the benefits of the wealth that you amass during your lifetime. Instead, they can simply reap the benefits and enjoy the fruits of your wise investing.
Suppose you can leave your children or grandchildren enough money to pay for their college education, purchase a home, buy a car, or fund another type of large purchase. In that case you’re setting your family up for long-term generational wealth. The driving force behind this idea is that the people who directly benefit from your wealth pass on to the next generation.
How Does Real Estate Make Generational Wealth Possible?
According to an article published by CNBC, roughly 90 percent of millionaires have real estate in their investment portfolio. While they may also be invested in businesses, stocks, bonds, and other securities, the fact remains that the most successful people in the world still use real estate as a way to create generational wealth.
What makes real estate investing so appealing? There are two driving forces that answer that question. First of all, real estate will always be a necessity. People will always need a place to live, and businesses will always need a place to operate. If you own those buildings, you are in a position to benefit from those needs. Secondly, you can leverage a real estate deal meaning that you don’t have to have as much cash upfront to become an investor. If you want to purchase $100,000 worth of stock in a company, you have to have $100,000. If you’re going to purchase a $100,000 property, you may be able to do so with only $3,000 to $20,000. Real estate allows you to build generational wealth even if you don’t have a lot of startup cash on hand.
The Correlation Between Real Estate and Generational Wealth
When discussing the types of assets in your portfolio, real estate is generally considered a fixed asset because it is more likely to be held long-term. Additionally, real estate generally appreciates in value, which puts you in a position to sell it for a profit in the future.
Real estate also serves a dual purpose, as you can use it as an investment, or you can set up your heirs with a place to live when they start their own life. Whether you use the property as an income source or a home for your heirs, you’re improving the financial position of the next generation of your family.
Ultimately, building generational wealth and investing in real estate go hand in hand. As the population continues to grow, the need for housing will only increase. If you can acquire properties in cities and areas projected to grow, you can position yourself to build wealth through real estate investing. Your wealth can then trickle down to your heirs, allowing them to enjoy the fruits of your wise investing and setting your family up for long-term financial success.