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Build Multi-Generational Wealth with Real Estate and Passive Income

Most people want to be outlived by two things: their work and their children. We all hope the things we are struggling to build during our lifetime will not be lost by those who follow us. But 70% of people who build wealth will eventually have that wealth lost in their second generation.

Investment Paperwork Spread Across the Desk Alongside a Calculator, Laptop, and Pile of Cash

As a matter of fact, the grandchildren of the vast majority of wealthy people today are going to enter adulthood broke. Their parents are going to mismanage and lose the assets their grandparents worked hard to acquire. Those kids are going to struggle to go to college or buy their first home.

But why does one family lose all its wealth and fade into obscurity, while another family keeps getting stronger and stronger? Is it because one family was luckier to be blessed with very smart individuals who knew how to manage money? Or is there some other reason?

Most wealth fails to make the transition from one generation to the next for a simple reason. The keys to building wealth are not always the keys to transmit and sustain that wealth. People who know how to make money may not know how to keep it throughout their succeeding generations.

The fact is that building multi-generational wealth takes more than being able to make money. It requires forward planning that outlives the original person who built the wealth. This is vital because no one can continue to personally direct their assets beyond their lifetime. But a multi-generational wealth strategy lets the wealth-builder exercise indirect control over the assets even when they are no longer here. How does this work?

The keys to building multi-generational wealth

To build wealth that outlives you, there are time-tested strategies to incorporate into your wealth-creation and -management plan. Every family that has seen its wealth successfully passed from generation to generation has implemented these strategies. What are these?

Step one: Create a comprehensive long-term financial plan

Businessman with Strategic Notes Written on PaperThe first step is to align your assets with your financial goals. This begins with gaining clarity on your short-term needs, long-term desires, and current financial situation. In the beginning, most wealth-building plans will have three phases:

The goal here is to build a roadmap for managing and growing the family’s wealth and also see to the wellbeing of future generations. To be really effective, the plan must have tangible assets and secure the participation of all family members.

Step two: Investing in stable income-generating assets

Interior View of a Luxurious Sitting and Dining Room ComboTo build transgenerational wealth, you must also give preference to assets that are not very sensitive to economic shocks. These should be assets that don’t need to be liquidated before you can generate income from them.

The asset which does this best is real estate. Property is a tangible asset whose value does not diminish with time because land is a finite resource that will always be in demand. Investing in rental properties meets all the parameters of good multi-generational wealth planning.

  • A real estate investment can be used to fund children’s college
  • Investing in rental properties is a proven way to plan for retirement
  • Real estate will continue to generate passive income beyond your lifetime

And in order for investment properties to become a basis for building multi-generational wealth, you need these things.

Step three: A foolproof plan for managing your assets

Loose Change on A Desk Amongths Paperwork, Notebook, and a Coin Purse in the Shape of a PiggyFirstly, you want to separate the asset’s ability to grow and yield income from how much time you invest in it. To make real estate a tool for retirement planning, it should produce income without requiring direct work. In other words, you want your property investment to be truly passive.

Secondly, the asset’s profitability shouldn’t depend on the expertise of your heirs. That’s because most wealth is lost in the second generation due to mismanagement. To secure your wealth for your kids and grandkids the performance of the assets should not depend on their skills level.

This is why all old-money families have trustees to manage their wealth. It is also why you need experts to look after your property portfolio. Managing your assets in this way will reserve the income from the assets for your heirs while protecting the assets from any mistakes your descendants might make.

Under the care of a property management company, you will have:

Moreover, these benefits will not depend on the expertise of a single individual in the company or the owner of the property management company. That is because the company, being a profit-making business, will always hire the best people to secure the highest returns for its clients.

This seemingly simplistic plan forms the basic framework wealthy families use to ensure their wealth is protected for their offspring. By borrowing a page from the playbook of the rich, you too can guarantee that your posterity will never have to start again from ground zero.

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