Written by: Olivia Forgette
Generational wealth is a term referring to financial assets that are passed from one generation of your family to another. It is often a goal of many to build wealth throughout their life to ensure future generations begin with a solid financial foundation. Real estate builds generational wealth. That is a simple fact. We are here to share with you some strategies to help you retire comfortably, and to create lasting financial security for generations to come.
Are you interested in becoming a homeowner or making a real estate investment? Contact Maureen Forgette for ways you can begin building your generational wealth through real estate. It is known that 54-percent of millennials received help with their down payment! There are potential options to help you reach your real estate goals, even if you feel like it may be out of your realm of possiblity.
Advantages of investing in real estate
Passive income
Investing in real estate delivers a unique opportunity for passive income. If you’re able to outsource daily operations, investing in real estate is a great way to get financial gain with little to no effort on your end.
Predictable and sustainable
Although the real estate market does fluctuate and has moments of potential loss (as any investment type), it’s a long-term trend that the real estate market consistently appreciates in value. If we look at the general housing market trends over the past 20 years, you can see that the average price home in the United States has grown from $140,000 to $340,000 as of April 2023.
Simple generational transfer
Once you invest in real estate, it’s simple to place the property in a trust with the help of a lawyer. This means that upon your death, ownership will automatically transfer to the selected beneficiaries of your trust. The ease of this transfer makes real estate one of the best ways to pass down generational wealth within your family. Other things you can do to ensure your properties can easily transfer to future generations include:
- Creating an official will
- Putting your real estate investments in joint ownership before you pass
- Having a transfer-on-death deed in place
Illiquid nature
Because real estate has an illiquid nature, meaning it is an asset that cannot easily be sold or exchanged, it is safe from market volatility and is more secure from irrational decisions made by the investor.
Strategies to build generational wealth
Thinking about building a form of generational wealth can seem daunting. It can feel like just gaining any wealth at all poses a challenge for many; however, if you utilize smart investing strategies, you can help set up the future of your children and grandchildren with assets you already have.
Join an investor pool
If you feel like you’re lacking capital to start investing in real estate, a great place to start is by joining an investor pool. Pooling resources with other like-minded investors can help give you a jump start on getting funds for down payments, advice for future investments, and helping with legal advice.
It is more common that investor pools purchase commercial property, or multifamily homes. These kinds of properties often generate more return at a quicker pace (AKA you will make capital gains quicker!). If you’re in need of a realtor with expert knowledge in commercial and multifamily properties, contact Maureen. She is happy to support you in any way you need.
Joining a pool is often seen as a more secure way to invest in real estate. Although there is always risk of loss in any investment, investor pools come with terms that frequently can double your investment in as little as five years.
Purchase multifamily properties
As we briefly stated above, investing in multifamily properties, rather than single family, is often a smarter way to build your generational wealth. A multifamily property is any residential property with more than one housing unit. Examples of this include:
- Duplex
- Townhome complex
- Apartment complex
- Semi-detached house
Investing in multifamily properties offers a higher cash flow at any given time, making it a smarter investment choice when using real estate to build generational wealth.
Consider this example; you have a single-family home rented out, and your renters move out or stop paying for any given reason. Now your income from the property comes to an immediate halt. As opposed to a multifamily property, if one of your tenants’ leaves, you will still be bringing in rental income from the additional units. This makes for a more seamless flow of cash.
Buy, Rehab, Rent
Another smart strategy to help you build generational wealth with real estate is to follow a method of buying a fixer-upper property, renovating the space, and then renting the home for maximum return.
Rent collected from one of these projects is often then used to fund future similar projects.
The best way to make the most return on these kinds of investments is to select a home with dated design, but functioning mechanics and bones. This will allow you as the investor to do-it-yourself (DIY) for the many needed upgrades and save you money on the rehab. Remember, the more you spend on the purchase and renovation, the longer it will take to recoup your investment and start making money on the property.
Real estate builds generational wealth
We hope it’s clear that real estate builds generational wealth for your family’s future. By investing smart now, you can help secure financial freedom for those you love most. It is a known fact that the average homeowner equity in the United States is $299,000 (wow!), and that homeowners have 40-times the net worth of those who only rent.