How to Build Generational Wealth through Real Estate

January 13, 2021
January 13, 2021 disrupt

How to Build Generational Wealth through Real Estate6 min read

One of the best ways to build generational wealth is by creating passive income by investing in real estate! An investment property purchased by one generation can create revenue streams for generations to come!

Ready to walk through how you can build multi-generational wealth by investing in real estate?

What is Generational Wealth?

Before we get to the basics of how to create generational wealth by investing in real estate, it’s essential to understand the definition of generational wealth.

As apparent from the name, generational wealth refers to assets passed down from one generation to the next.

These assets can be in the form of a business, investments, or, as our topic suggests, cash-flowing real estate!

Generational Wealth – The Basics 

If you are reading this article, I am assuming you know the importance of building long-term wealth.

If we look at historical examples, we can clearly see many generational wealthy families who invested in real estate to build long-term wealth for their descendants.

Take the Hiltons for example. Conrad Hilton, the man behind the Hilton Empire, purchased a 40-room hotel during World War II.

In 1954, he created the world’s first international hotel chain by the name of Hilton Hotels.

When he died in 1979, his sons took over the family business and benefited from it. It was not until 2007 when Blackstone purchased Hilton Hotels for $26 billion.

Although the Hiltons do not currently own the hotel chain, the wealth generated from this venture will continue to benefit the family in years to come.

Conrad’s great-granddaughter, Paris Hilton, is a living example of generational wealth inheritors, who has acquired a net worth of $300 billion.

Generational wealth allows families the protection and stability for years to come.

Let’s analyze some ways investors can get started on the path of building generational wealth with one of the best asset classes- real estate.

How to Build Generational Wealth by Investing in Real Estate?

Real estate investing is a great asset to build generational wealth as it offers investors multiple incentives such as tax advantages, cash flow, leverage, and appreciation that help investors scale their wealth over time.

Although you can earn great returns through any type of real estate investing an important aspect to note is the fact that building wealth takes scalability.

For example, if you were to build a portfolio of single-family houses, you’d have to find 20 separate houses.

That’s 20 different sellers, 20 different inspections, and potentially 20 different mortgages. Not to mention finding 20 or more different tenants to occupy your investment portfolio.

This would put a hindrance on your scalability for building generational wealth.

On the other hand, investing in one multifamily real estate asset creates an instant portfolio with the ability to hire a team to help manage the day-to-day operations of your portfolio. This will free up your time to underwrite more and more real estate investment opportunities!

Another point to mention is with multifamily investing, you will receive more lucrative returns.

The extra cash that comes with multifamily real estate can help safeguard you from loss. There’s more room for error, and you may have more capital to further grow your investing business to work towards building generation wealth. You may be thinking, I see the power of multifamily investing to build generational wealth but what if I do not have the capital to buy such a large investment property?

Not everyone can invest in multifamily properties single-handedly. This brings us to the concept of multifamily real estate syndications and how it aids in building generational wealth.


Utilizing Multifamily Real Estate Syndications to Build Generational Wealth

A multifamily real estate syndication is a type of real estate investment opportunity that gathers investors who put together their monetary resources to finance a multifamily investment property(s).

Multifamily real estate syndications allow for investors to utilize one another resources, knowledge, and experience to invest in a very profitable real estate asset.

Here are some of the benefits that multifamily real estate offers investors who are looking to create long-term wealth over generations.

  1. Diversification 

Multifamily real estate has a low and, in some cases, a negative correlation with other major asset classes.

This allows investors to increased diversification on their investment portfolio, lowering volatility! Secondly, by investing in multifamily syndications, investors can buy various assets in different markets, which results in multifamily asset diversification.

  1. Cash Flow & Equity

Cash flow is the total income from a real estate investment after the mortgage, and additional expenses have been covered. One of the upsides of investing in real estate syndications is cash flow.

Most multifamily real estate syndications offer investors a 7-11% annual cash on cash return! 

This strong cash flow allows investors to utilize the money from their investments to deploy capital into other opportunities.

Not to mention in many cases, cash flow only strengthens over time as you pay down your mortgage. By doing so you build equity, an asset that’s part of your family’s net worth.

By creating equity, you have the leverage to buy additional properties to increase your cash flow and wealth. Ultimately moving you towards creating generational wealth.

  1. Economic Appreciation & Forced Appreciation 

It is a common fact that real estate values tend to increase over time. Rents also tend to rise over time, in most years, 1.5-3% a year, which can lead you to receive a higher cash flow.

One of the biggest advantages of multifamily real estate syndications is the opportunity to force an asset’s appreciation.

This is the secret to creating long-term wealth through real estate.

Forced appreciation is the increase in value through actions taken by the ownership team.

This occurs when the investors force an increase in net operating income (NOI) by increasing revenue, decreasing expenses, or both.

This can happen in multifamily real estate by CAPEX improvements to the asset, upgrading units, adding amenities, etc. Making these improvements allows owners to raise rents of the property and increase the assets NOI creating a lucrative asset.

  1. Tax Advantages

Utilizing real estate has allowed many of the world’s wealthiest families to build wealth and keep it.

Real estate offers investors various tax incentives such as depreciation, 1031 exchanges, cost segregation, and more.

  1. Learning to Manage Capital 

One of the most overlooked benefits of multifamily real estate syndications is to learn how to manage capital.

By going through investment summaries or deal decks, investors gain a considerable amount of knowledge about how the market works, the dynamics, and how to look at opportunities.

This proficiency is like gold for real estate investors and helps create the skills for investing in the right opportunities.

Wrapping Up

Building generational wealth is a gift for your descendants. It serves as an economic head start for them and helps them lead a financially secure life.

So, if you want to build wealth during your lifetime to benefit the generations to come, invest in multifamily real estate to advance your wealth.

For more information about utilizing multifamily real estate syndications as a tool for building generational wealth, please feel free to reach out to our team here.

If you are interested in investing in multifamily investment opportunities, fill out this form to be notified of our upcoming offerings!

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