Think in Terms of Generational Wealth

31 May Think in Terms of Generational Wealth

Wealthy people plan for three generations. Poor people plan for Saturday night.

The average American spends more time planning their annual vacation than they spend planning their investments.

You can make a great living selling real estate. You can make a fortune owning it.

Okay, so I’ve given you some adages. A lot of people can make serious money, yet how many actually pass a lot of that money on to the next generation? And how many can make the wealth last for at least two generations, ensuring that the money is not squandered? How do you create wealth that will outlast you?

• If you own a cash-flowing, well-managed rental property, you could own it for your entire life. When you pass away, your heirs receive the asset at a stepped-up tax basis. In simple terms, your heirs don’t have to taxes on the capital gains that you achieved. You’re able to pass an asset on to the next generation without having to pay capital gains taxes. Teach your heirs that they may be better off continuing to own the asset versus selling it at their first opportunity.
• You can own short-term rentals, particularly in exotic or highly desirable locations. Imagine buying a furnished home on the beach. You have a property manager handle vacation rentals about 42 weeks a year. The other 10 weeks you and your family stay there. Imagine if you establish a family tradition in which you spend every July 4th at the shore. Your annual trips will create memories. When you pass away, you leave the coveted beach home for your heirs so they can continue to make memories while introducing the home to their heirs.
• Wealth is a state of mind and a set of behavior patterns. Teaching others how to create long-term wealth is part of your legacy.
• If all you do is flip houses, it’s harder to build generational wealth. Skilled flippers pay a lot in taxes on their short-term capital gains. Sure, a successful flipper could use some of their profit to buy assets that appreciate in value. Yet all those taxes erode future wealth opportunities. Owning some rental properties, or using profits to buy stocks or bonds, will create assets that can be passed on to others.

Ponder how to acquire assets that produce income and appreciate in value over time. Have a 50-year plan and not just a one-year plan. Don’t just give your heirs a fish; teach them how to fish. Share a set of values and principles with those who matter most to you.

Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania.  He became a full-time real estate investor in 2004 after serving in the U.S. Navy.  Tai made colossal mistakes in investing (and learned some things along the way).  Tai has coached hundreds of entrepreneurs, real estate investors, and real estate agents on how to increase their income and net worth. He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Amazon.com. Tai may be available for coaching and speaking engagements on a variety of real estate topics.  Send an email to tai@investandtransform.com.