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2 Steps to Leverage Real Estate To Build Generational Wealth

Have you ever imagined what it would feel like to have more than enough money today to pay for your children’s college education or be able to face retirement without fear? If you have had these thoughts, you have contemplated the possibility of building multi-generational wealth.

Multi-generational wealth is when an individual builds enough wealth in their lifetime to meet the needs of their future generations. People who build multi-generational wealth ensure that their offspring will not face the same money problems they struggled with.

Aerial View of a Residential Neighborhood

Everyone wants to know how to own that kind of wealth and in the imagination of most, the key lies in making a lot of money. But this is not true; most rich families will go broke before their fourth generation. This is true for 70% of people who make a lot of money during their lifetime.

Yet, there are families that have been able to preserve their wealth for hundreds of years. What do they know about building multi-generational wealth that others don’t? It’s actually simple; they know that making money is only the first step to building wealth that spans many lifetimes.

The keys to multi-generational wealth

People who build multi-generational wealth understand the nature of money. They recognize money as something fleeting that is soon lost if not properly used. They know that money must be protected and to protect their money, they use two strategies:

  1. They invest in assets with intrinsic value
  2. They create vehicles for protecting those assets

Strategy one: They buy assets that are intrinsically valuable

Money does not equal wealth; you cannot build wealth by simply saving money. Money is not wealth because the value of money can be eroded. Money saved today will see its future value destroyed by inflation. This happens because money does not have intrinsic value.

To build multi-generational wealth you must invest in assets with intrinsic value. Your goal should be to convert every dollar you save into such assets as soon as possible. There are many types of assets with intrinsic value but the one with the highest intrinsic value is real estate.

The price of land may fall temporarily but its value is never lost because people will always need land. There is a reason why people who have the most money in the world are also the biggest owners of the property. Real estate is a time-tested way to hold and transmit wealth.

Checking Current Portfolio Data on a Laptop and SmartPhoneBut what should you do with the properties you buy? You use a method called BRRRR investing to turn one property into a portfolio of properties. What is BRRRR investing? BRRRR stands for Buy, Renovate, Rent, Refinance and Repeat.

  • Buy: Buying the right property is the basis of this strategy. The quality of the property determines how much you will spend to fix it and how much you earn from the asset.
  • Rehab or Renovate: Rehabbing the property will improve its value, boost its income-earning potential, and reduce your maintenance cost.
  • Rent: Renting the property is what unlocks its potential to generate cash flow. The quality of your tenants and the lease duration influence how much income you earn.
  • Refinance: Refinancing the rental will let you take your money out of the property and reinvest it in other cash flow producing assets.
  • Repeat: By using the money from stage 4 to buy another property, you can multiply a single property into a portfolio of properties, all earning rental income for you.

This is what many of the super-rich do to protect their money from economic shock, as well as, to grow their assets. But, to expand this into a method for building multi-generational wealth, you need one more strategy.

Strategy two: They build a framework to ensure longevity

An Agent Presenting His Clients with DataThe most important way to sustain wealth is to separate it from time and effort. If your assets earned income without your direct input of labor, you could make money indefinitely. Such a plan would let you keep making money well into old age and beyond.

Families whose wealth spans multiple generations are able to do it because they don’t manage the assets directly. They leave their real estate holdings in the hands of competent property managers. By letting qualified people manage the assets, they guarantee these for themselves:

  • The performance of the asset will not depend on their own time and expertise.
  • They ensure that even in their absence the assets will be protected.
  • They shield the assets from the inexperience and errors of their offspring.
  • They make sure their wealth is preserved for future generations.

Here is the conclusion: in order to build generational wealth you need to know (and meet) the mortgage requirements for buying a rental property, find and buy a property with potential, and hire a property manager who can grow your assets.

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