How to Build Generational Wealth Through Real Estate

Many real estate investors enter the market for the sole purpose of building generational wealth. It’s a noble ambition because you create a lucrative empire that you can pass onto your children and grandchildren.

If you’re just getting started as an investor, it might feel overwhelming to think about managing an entire real estate empire. Shrug off those feelings by remaining focused on the goal of accumulating generational wealth. Channel those feelings into positive momentum and work towards achieving your goals.

What is generational wealth?

Before diving into the specifics of building wealth through real estate, let’s first answer the most fundamental question. What exactly is generational wealth, and how do you build it?

Generational wealth is defined as any valuable asset that’s passed on from one generation to the next. Cash savings, financial investments, family businesses and, yes, real estate assets are prime examples of family inheritances.

Why real estate is the best generational wealth asset

Here’s what most people don’t think about when building generational wealth assets. Cash savings, financial investments, and family businesses are all subjugated to the whims of national monetary policies.

Canada is currently undergoing a financially taxing war against rising inflation. The Bank of Canada recently raised the country’s overnight interest rate to 5%. The last time the rate was posted at this level was on March 1, 2008, right on the precipice of the 2008 financial crisis.

Cash savings decline amidst rising interest rates because banks pass those borrowing costs onto customers with higher bank fees. Financial investments also lose value as some investors pull their funds out of the market, reducing the cumulative value of investable stocks. Family businesses also struggle because it costs more money to qualify for financial assistance. It takes more time for these assets to recoup losses incurred during tough economic times.

Real estate is not impervious to the realities of higher borrowing costs. However, real estate is a much longer term investment strategy. Fluctuations in national monetary policy and the trickle down effect on financial capital has less effect on real estate assets. That’s why building a real estate empire is the best way to pass on generational wealth to your descendants.

Four real estate investing tips to build generational wealth

So what’s the best way to invest in real estate and accumulate generational wealth? Here are four proven strategies to help you build your real estate empire and create generational wealth for your future family.

• Use OPM (other people’s money)

Limit your own risk when investing in real estate by embracing the acronym of OPM. When you can pool your capital together with other investors, you don’t shoulder the cost of those investments alone. Simply spread out the expenditures and reduce your own costs.

Other investors call this approach investing in a real estate syndication. They enable investors like yourself to earn ROI in only a few years and sizable increases on your initial capital investments. Whenever possible, look for opportunities to use OPM and reap the rewards.

• Invest in multifamily properties

This is one of the most overlooked investment strategies among beginners. Ironically, it’s also one of the most profitable strategies for real estate investors.

Multifamily real estate investing is a winning strategy. Why? The reasons are very straightforward.

1. You create a steady stream of inbound cash flow every month.

2. Risk is minimized because you’re leasing rental space to dozens of tenants.

3. It’s easier to qualify for financing to invest in multifamily properties.

4. Building inspections and legal considerations are easier to complete.

5. You can hire property managers to run the day to day while you count your cash

If you’re ever presented with the option to invest in a single detached property or a multifamily property, go for the multifamily investment whenever possible. It’s less risk, higher reward, and the perfect type of asset to build generational wealth.

• Use the BRRRR strategy to make smart investment decisions

In real estate, the acronym BRRRR stands for “buy, rehab, rent, refinance, repeat.” It’s a strategy in which you focus on buying fixer-up properties that you can repair, revitalize, and flip for higher sale prices.

Look for a property that is listed at below-market prices because it needs cosmetic repairs (fresh paint jobs, new door handles, etc). They’re all minor repairs that require little additional capital to fix up. When a property is listed with these cosmetic issues, the current owner needs to offer a discount to entice new investors to buy.

Commit to fixing these repairs yourself (or hire a credible handyperson) so that you can complete the sale at a bargain price. Once you complete the repairs, you can flip the property for an above-market asking price and make your money back in spades.

• Have a winner’s mindset to make investments that pay long-term dividends

Finally, always make sure that you have the right mindset when making a real estate deal. Let go of any fears, doubts, or misbeliefs about your ability to make money as a real estate investor. This simple mental exercise will give you opportunities that other investors can’t realize.

Do your research into the type of properties you want to buy and the best locations to make those investments. Look at posted mortgage financing rates for properties in your wheelhouse so that you can negotiate terms from an informed point of view.

Also, remember to shift your time and attention towards multifamily properties because there’s more money to be made in those investments. Having the right real estate investment mindset makes all the difference as you begin your journey to create generational wealth.

Join the ultimate real estate investment community for tips, mentorship, and a successful playbook

Building generational wealth for your family is a noble ambition, and it can seem like a huge undertaking if you’re just beginning your journey. Take some of the weight off your own shoulders by joining a real estate investment community.

The right community grants you access to proven investors who can act as your mentors. Listen to their advice, and you’ll avoid making many of the same mistakes they once made early in their own investment careers. Additionally, speak with fellow investors just beginning their own journeys. You can compare notes and potentially pick up some new ideas.

Start your own path towards building generational wealth. Join the ultimate real estate investment community to start transforming your dreams into reality!