My Opinion on Building Generational Wealth

Member since 2019 · 7k+ posts · 4k+ votes

3y

This is something I hear real estate investors talk about all the time. Their goal is to build generational wealth for their kids, grandchildren, great grandchildren, etc. They believe by building a good real estate portfolio and acquiring assets they will create generational wealth for their family. I believe I have a controversial take on this stance. I 100% disagree with this line of thinking!

There are stories of family’s that have had multiple generations build wealth through owning land, real estate, oil, etc. that have lost it all in 1 generation! Wealth is incredibly hard to obtain and 10x harder to keep. Just because you are able to hand over your children and grandchildren wealth doesn’t mean that they will know how to keep it. They have to know how to handle the wealth if they are going to keep it. My focus will be on teaching them how to create and keep wealth, not handing it over to them.

How I will focus to create generational wealth will be the complete opposite of what most people want to do. My kids will not be handed anything in life, they will EARN everything. I will not give them money, instead I will be there to teach them what they need to know to get their own money. I will teach them what I’ve learned in my life that they can use to create their own success. When they need advice, I’ll be sure to provide it. When they are struggling through the rough times, I’ll be there to support them. My goal is to create kids who are good people. If I can do that, they won’t need my wealth, they will have their own.

What are your thoughts about creating generational wealth?

lol, so i am talking two real case scenario here :
- in bay area, it's very common to see the current generation, although they don't have that 6 income salary, such as teacher and so on, but because their parents doing the right things aka buy real estate or multiple real estate, their current generation is generally "okay".
- in asia this is even extremely common, not just the parent is giving them real estate but parents also give them a company or position in a company, even oil well LOL again this is not uncommon especially for top 5.

I myself "set" for my next two three generation since I am living free in CA and Hawaii LOL , I guess my kid don't need to think about crazy housing pricing for like forever as long as they have good decent job LOL

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Corey Conklin:

Quote from @Ned J.:

Marcus already stole my quote..... provide your kids enough $$ to do something but not enough to do nothing....

Shaq also has the right attitude with his kids.... he has multiple statements about his wealth and his kids... basically he says " WE arent rich..... I"M rich.... you aint got jack".... you will make your own way in life. I'll be there to help guide you.... you want my $$? Then come up with a business proposal and I'll review it just like any other investment I would make.

@Ned J. That quote is very similar to one I'm familiar with "give a man a fish, you feed him for a day. teach a man to fish, he'll eat for a lifetime"

My job as a father is to teach my kids to fish and watch them go catch their own. Hopefully I live long enough to watch them catch bigger fish than I ever could.

This is good. That quote/proverb is coming from Chinese if I'm not wrong. So there's a bit cultural aspect also here.

In reality the quote in practical is something like this "

"give a kid a fish, you feed him for a day. teach a "kid" to fish, he'll eat for a lifetime, but give your kid all your fishes too" LOL

Good stuff. In reality, again this is very different than the west culture where kid is usually become independent so quick and many times got almost no help from richer parent. In Asia parenting , the daily routine is extremely hard (unlike "easy" like the west to current GenZ) that the asian kid has to overachieve their progress anyway regardless of their inheritance status in the future.

my grandpa from my side and my wife acquire lot of properties in 1950s for their children, so does my parent and my wife's parent is keep buying property and small store, while I'm buying rental for next generation as well, maybe my kid would do the same.

So while "creating a generational wealth" has been applied to us for the last three generation but that doesn't make us spoil but still working hard (due to style of parenting that we got) ..I have lot and lot of doctors in the 1980s and they got their first home from the parent still. It's just it's the way it is. Now things like 1031 is ultimately created for generational wealth.

when our parents do the things correctly (buying house, focus on investment and education, good lifestyle as of no drug no divorce no drama)....the rest of generation would be just fine.

1 Reply

Eric Bilderback

Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes

3y

"Instead of giving your kids everything you never had, teach them everything you wish you would have known."

-Bruce Lee

Plus nobody likes trust fund kids

8 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

3y

It's not a picnic being raised with real money, dynastic wealth. I used to go to school with the son of a famous Greek shipping tycoon, crazy rich, net worth up in the hundreds of millions. He hated his life, constantly talked about committing suicide, drank like a fish and crashed his car routinely (his father's people always replaced it, even once got him a fake yet valid license to drive with). Good guy deep down, and I would not wish what the money did to him and his family on anyone.

Then in grad school I had an undergrad friend whose father was an exiled Russian count. The apron strings were so tight on this boy it was incredible. He'd never had a date that wasn't set up, never dared to touch any of the other children of Russian nobles he was set up with, had no idea how to kiss a girl. At 20. Would you want that for your son?

2 Reply

Scott Mac

Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes

3y

Quote from @Jim K.:

It's not a picnic being raised with real money, dynastic wealth. I used to go to school with the son of a famous Greek shipping tycoon, crazy rich, net worth up in the hundreds of millions. He hated his life, constantly talked about committing suicide, drank like a fish and crashed his car routinely (his father's people always replaced it, even once got him a fake yet valid license to drive with). Good guy deep down, and I would not wish what the money did to him and his family on anyone.

Then in grad school I had an undergrad friend whose father was an exiled Russian count. The apron strings were so tight on this boy it was incredible. He'd never had a date that wasn't set up, never dared to touch any of the other children of Russian nobles he was set up with, had no idea how to kiss a girl. At 20. Would you want that for your son?

I had no idea you were that well off.

In your posts you come across as a kind of go to the 7-11 and get a Big Gulp and burrito for lunch kind of guy (nothing wrong with that, most everyone likes soda and burritos) vs table cloths and 3 forks.

I remember you once said you learned this business from your Grandfather.

Did he pass his properties to you?

1 Reply

John Bolstad

Member since 2023 · 7 posts · 23 votes

3y

This is what I plan on doing with my kids one day! Don't give the boy a fish, teach him to fish!

1 Reply

Matthew Masoud

Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes

3y

Building generational wealth has nothing to do with actually passing down money.

It's passing down skills and habits to keep/create more wealth.

4 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

3y

Quote from @Scott Mac:

Quote from @Jim K.:

It's not a picnic being raised with real money, dynastic wealth. I used to go to school with the son of a famous Greek shipping tycoon, crazy rich, net worth up in the hundreds of millions. He hated his life, constantly talked about committing suicide, drank like a fish and crashed his car routinely (his father's people always replaced it, even once got him a fake yet valid license to drive with). Good guy deep down, and I would not wish what the money did to him and his family on anyone.

Then in grad school I had an undergrad friend whose father was an exiled Russian count. The apron strings were so tight on this boy it was incredible. He'd never had a date that wasn't set up, never dared to touch any of the other children of Russian nobles he was set up with, had no idea how to kiss a girl. At 20. Would you want that for your son?

I had no idea you were that well off.

In your posts you come across as a kind of go to the 7-11 and get a Big Gulp and burrito for lunch kind of guy (nothing wrong with that, most everyone likes soda and burritos) vs table cloths and 3 forks.

I remember you once said you learned this business from your Grandfather.

Did he pass his properties to you?

LOL. My grandmother lost it all after my grandfather died suddenly at a young age. I was raised on food stamps in upstate NY. I met these people in college and grad school, which I attended thanks to both need-based and merit-based financial aid.

3 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

3y

Quote from @Jay Hinrichs:

now from reality.

I have worked in this industry for 50 years now.. and met all sorts of folks from beginners to the Very wealthy..

what I see many times is when the kids do inherit most of them have no interest in owning the rentals or whatever property they are getting as most of the time there is massive equity. And they just want to sell and cash out.. granted some will hold on but for many second they can sell they do so.

So if folks are wanting their kids to keep the assets then they have to be put into a trust with very clear defined rules of the road to follow. Anything short of that and all those rentals yo toiled with will be liquidated as soon as humanly possible.

plus if there is multiple kids rare is it they all have a meeting of the minds .. so again they just sell and divvy up. Specially with stepped up basis.

Yup. 100%. I own a couple of those houses sold to me by the "kids" when the parents died off. One of them was a group of 4 kids in their late 50's/early 60's who couldn't wait to split $34k (what was left after they paid the realtors) on a house that could have made that renting as-is in less than 3 years. OK, maybe they really needed that $8500 each but the reality is most of these kids will see these rentals as nothing more than locked-up cash to be liquidated when you are dead.

Also, as the old saying goes, "From a camel to a camel in 5 generations". Or "From a shovel to a shovel in 5 generations". Whatever you prefer. There are very few dynastic individuals running around today in the US despite some of the richest ancestors ever to walk the earth less than 200 years in the past.

Podcast Guest on Show #243

Skyline Properties

View Page

4 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

What a story, but I'm still intrigued by how come when one group of people is leaving the community then the new wealth is dropped into "your laps/your community/group" ? Is there sort of legal transition here ? what's the story looks like...

[ We had similar story but in different context where there's actual displacement and new wealth generated when the occupier of the land/colonizer is leaving the country/land ]

0 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

3y

Quote from @Carlos Ptriawan:

What a story, but I'm still intrigued by how come when one group of people is leaving the community then the new wealth is dropped into "your laps/your community/group" ? Is there sort of legal transition here ? what's the story looks like...

[ We had similar story but in different context where there's actual displacement and new wealth generated when the occupier of the land/colonizer is leaving the country/land ]

Most likely the homes/properties were sold at "fire sale" prices to minorities, who then held on to the properties long enough to benefit financially from the inevitable gentrification that usually ends up taking place in these areas. In the 50s and 60s whites would sell out cheap once minorities started moving in because of either outright racism (they didn't want to live on the same street/block) or fear of being unable to sell (because other racists didn't want to live on the same street/block). This was the way that entire blocks and even cities changed virtually overnight. I grew up in Orange, NJ, which was one of the earliest wealthy suburbs (of NYC) in the US. Like most cities in the US it mirrored immigration and gradually went from English to German to Irish to Italian, but when the 67 riots happened in Newark (the city next door), anyone who was white that could sell did so, at prices cheap enough that black families could afford to buy. So my city went from mostly white to mostly black within 5 years.

Podcast Guest on Show #243

Skyline Properties

View Page

2 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

3y

The practice is called "blockbusting."

Wikipedia article: Blockbusting

3 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

3y

Quote from @Jim K.:

The practice is called "blockbusting."

Wikipedia article: Blockbusting

I knew that but figured most of our readers didn't and I didn't want to make it needlessly complicated :) . However, in the case of most of the "white flight" cities after the riots, no prompting was needed by anyone and there weren't any inflated prices as the white residents were willing to sell to anyone just to get some return.

Podcast Guest on Show #243

Skyline Properties

View Page

1 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @JD Martin:

Quote from @Jim K.:

The practice is called "blockbusting."

Wikipedia article: Blockbusting

I knew that but figured most of our readers didn't and I didn't want to make it needlessly complicated :) . However, in the case of most of the "white flight" cities after the riots, no prompting was needed by anyone and there weren't any inflated prices as the white residents were willing to sell to anyone just to get some return.

yea that "inflated price" part is bit conflicting. So wiki says "The blockbusters would then sell those same houses at inflated prices to black families seeking upward mobility"

but then it says "the seller is selling at fire sale price"...

0 Reply

Mark Cruse

Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes

3y

Quote from @Carlos Ptriawan:

What a story, but I'm still intrigued by how come when one group of people is leaving the community then the new wealth is dropped into "your laps/your community/group" ? Is there sort of legal transition here ? what's the story looks like...

[ We had similar story but in different context where there's actual displacement and new wealth generated when the occupier of the land/colonizer is leaving the country/land ]

JD Martin pretty much summed it up. The whites were racist or afraid or had some kind of issue with African Americans moving around them. As soon as one more Black Person moved in, 5 to 10 whites put up for sale signs to move out. They sold their property to whoever came along and most of them were Black. My parents purchased a home in the county in 1969 for 16k. I assume the white person who sold to them fled to Charles, Calvert or St Mary's county. Wherever they ran to they purchased well above what they sold for. Their disgust of being around others made them lose on their investment. In their minds, at least they didnt have people who looked like me around them, their women or their children. That home my parents purchased is now worth 600k. Prince Georges is majority minority with home values of hundreds of thousands into the millions. Those places the whites fled to have lower appreciation levels which is what's fueling gentrification. Their off spring does not have the same degree of despise and they want the ambiance of the city back. The younger generation is strategically taking the cities back and recapturing all the wealth their parents relinquished. Prince Georges County has close to one million people. Had all those whites not abandoned their property there would not be millions of dollars of wealth being passed to generations of African Americans. People would may be amazed to know that as early as the late 70 Prince George's County still have openly racist cops and clan activity.

3 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

3y

Quote from @JD Martin:

Quote from @Jim K.:

The practice is called "blockbusting."

Wikipedia article: Blockbusting

I knew that but figured most of our readers didn't and I didn't want to make it needlessly complicated :) . However, in the case of most of the "white flight" cities after the riots, no prompting was needed by anyone and there weren't any inflated prices as the white residents were willing to sell to anyone just to get some return.

I'm actually sorry I brought it up, in retrospect.

1 Reply

Darius Ogloza

Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes

3y

The purpose of building wealth your family can tap into is to make sure they have something to hang onto in case you are no longer there to teach them anything.

The future's uncertain and the end is always near. So, let it roll, baby, roll.

1 Reply

Peter TverdovBusiness Member

Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes

3y

Quote from @Matthew Masoud:

Building generational wealth has nothing to do with actually passing down money.

It's passing down skills and habits to keep/create more wealth.

This. I cringe when I see this talked about on social media and people bragging about having 6 figures of stocks for their kids by 18 and multiple houses blah blah blah. All you are creating in that scenario is a trust fund baby with no work ethic who will piss away all your hard work. Teach them how to work, don't hand them money on a plate people.

[email protected]732-289-3823

3 Reply

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

3y

Navy E4 promotion. Passed E5 test waiting on time in rank before moving up at 22. Had his Eagle Scout so that bumped him a grade. Can’t wait for his E5 then he can live off base and get BAH tax free money to do real estate investing if he wants. Worked with us on Selfstorage landscaping, skidsteer work, painting, locking at nights, etc. He doesn’t need anything more from us. If he decides to stay in and do Real Estate he can be a millionaire and I can show him how. If he wants to get out and wants to can show him how to become a multimillionaire in 4 years. Doesn’t matter what he does in the future I’m happy forever at this moment with him serving.

My dad at 16 in the Navy. He lied about his age. 23 years in the military. His sole objective in life coming out of the depression was for us to have a roof over our head, all the food we could eat and all the milk we could drink. He was successful. After high school it was on us to succeed. Which both our mom and father prepared us.
.
Other than being in the side watching him grow my son has everything he needs grow. On the real estate side I can tell him to just read my BP posts.

5 Reply

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

3y

Generational wealth.

Don’t believe in it.

About 5 years ago went through the process of setting up our Trusts and getting with a financial advisor.

1. Our son who is 22 will get so much at 30 and then another amount at 35. Wanted him to get it at a point when he has matured and had some life lessons learned. But while he can still do something with it.
2. Most will go to functions around town. Fire department, park, music amphitheater, some successful young nieces, etc.

3. How you approach generational wealth depends on how far below or above the lifetime gifting and estate tax limits.
4. If below you let stepped up basis take care of everything. Problem with that is you need to die early so your kids are still young enough to add value. If they are 60 when you die, they probably won’t push the envelope.

5. If your above the limits then you need to look at insurance products for your kids when they are very young that roll over to cash annuities after about 10 years to help pay for estate taxes so they don’t have to sell. Or invest in long term assets such as Teak plantations.

My uncle/wife and 3 kids started with $300 and 5 sacks of clothes. Very successful and wealthy.

I also can remember having $300, sack of clothes and an old flatbed truck. One of the happiest days of my life financially.

The US is great. Any person or family can be wealthy in 10 years starting from zero.

7 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Darius Ogloza:

The purpose of building wealth your family can tap into is to make sure they have something to hang onto in case you are no longer there to teach them anything.

The future's uncertain and the end is always near. So, let it roll, baby, roll.

Totally agree, I have been thinking of what would happen for the next 10 20 years and I am 100% sure , all these inflation and home price thing are going to create the great divide or huge GENERATIONAL GAP :

1. As home price is exponentially grow higher than income ; and also typical inflation may be around 3-4% and Fed rate between 4-5%, having a property as backbone of safe security net for next generation, is even harder.
Gen Z in this particular, would have very difficult time for them to grow to match the capacity of their parent.
(In quick summary, lets say in 1980 one father working at USPS living in California, they can still handle a house and family of four ; but the current gen Z would never be able to follow that path).

2. Milleneal and Gen Z would also going to marry much more later in their life, if they want to marry , which also means they would not qualify for mortgage. Their only choice is either they are going to marry with someone that has good job also ; OR they move further to South or NC or Texas.

3. All these tech invention is also gonna create even further push to society, one that can adapt to technology , one that can't adapt to the new changes would just end up with regular admin job which bring them nowhere.

4. Looking at current demographic in CA, many cities in this state are actually being saved from further 'disintegration' is because their parent or grandparents bought properties that they can use. One can't live with 50k as elementary teacher salary in bay area, unless one is having "free house" from their previous generation

5. If you look of who is acquiring wealth in US right now, 60% are baby boomer generation , with Milleneal and Gen Z is only having less than single digit.

6. Like it or not, as Gini ratio increases, I would expect more crimes in this country and neo-progressive ruling class may even further dictating the country.

The future is not looking good for next generation, and this is why I precisely bought properties for them so they can survive.
America is really following the economy's trajectory of Asia post 1999 era where most things are suddenly become unaffordable.

0 Reply

Joe S.Pro Member

Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes

3y

Quote from @JD Martin:

Quote from @Jay Hinrichs:

now from reality.

I have worked in this industry for 50 years now.. and met all sorts of folks from beginners to the Very wealthy..

what I see many times is when the kids do inherit most of them have no interest in owning the rentals or whatever property they are getting as most of the time there is massive equity. And they just want to sell and cash out.. granted some will hold on but for many second they can sell they do so.

So if folks are wanting their kids to keep the assets then they have to be put into a trust with very clear defined rules of the road to follow. Anything short of that and all those rentals yo toiled with will be liquidated as soon as humanly possible.

plus if there is multiple kids rare is it they all have a meeting of the minds .. so again they just sell and divvy up. Specially with stepped up basis.

Yup. 100%. I own a couple of those houses sold to me by the "kids" when the parents died off. One of them was a group of 4 kids in their late 50's/early 60's who couldn't wait to split $34k (what was left after they paid the realtors) on a house that could have made that renting as-is in less than 3 years. OK, maybe they really needed that $8500 each but the reality is most of these kids will see these rentals as nothing more than locked-up cash to be liquidated when you are dead.

Also, as the old saying goes, "From a camel to a camel in 5 generations". Or "From a shovel to a shovel in 5 generations". Whatever you prefer. There are very few dynastic individuals running around today in the US despite some of the richest ancestors ever to walk the earth less than 200 years in the past.

So in the story above you mention it was multiple siblings that sold a house to get a little bit of money that would have to be split. A major challenge of generational. Wealth is the fact that there are multiple siblings and their families that have differing views of how a business and assets should be run. Of course this is not the only challenge to generational wealth, but it is a major challenge.
in my opinion, some of the major challenges for generational wealth are.…

Children that are not interested in carrying on the business.

Parents getting a divorce and the only one making money is the divorce attorney.

Multiple children trying to get along together to share the wealth.

An incorrect structure of passing down wealth,

2 Reply

Matthew Masoud

Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes

3y

Quote from @Peter Tverdov:

Quote from @Matthew Masoud:

Building generational wealth has nothing to do with actually passing down money.

It's passing down skills and habits to keep/create more wealth.

This. I cringe when I see this talked about on social media and people bragging about having 6 figures of stocks for their kids by 18 and multiple houses blah blah blah. All you are creating in that scenario is a trust fund baby with no work ethic who will piss away all your hard work. Teach them how to work, don't hand them money on a plate people.

if they don't know how to handle it they will end up exactly like those lotto winners that lose it all.

1 Reply

Sharon Mittelman

Lender · Member since 2023 · 36 posts · 14 votes

3y

@Corey Conklin I love your thinking, education is KEY in my mind, that is the reason I started talking and educating my kids from young age. My youngest has been filing his own taxes since the age of 5 !!! He has more ROTH retirement money at 16 than I had in my mid 30s.

When the kids were at school and they wanted to go on a trip , I told them : "you go work and make the money for your trip, I'll pay for your trip and you put the earned money in your retirement"

I shared with my kids from early age the idea of cost of money, credit cards etc. When it was time to get my oldest a credit card , she was shocked that the interest on it after the Zero % interest is over is 26% .

She is not interested in RE yet, but my youngest just asked me yesterday, if he can learn with me and start investing.

0 Reply

Sharon Mittelman

Lender · Member since 2023 · 36 posts · 14 votes

3y

@Corey Conklin Not sure how old are your kids. when I started educating my kids they were young.

One of the things I did with them was open a special saving account (local Credit union) that gave them 6% on the 1st $500. that meant over $2 every month in interest.

When they asked for a new toy - I told them :"you have money in the bank, you can use it but if you do you will het less interest. So do you really want the toy or do you prefer more money from the bank", most of the time they said :"I'll take more money" :)

0 Reply

My Opinion on Building Generational Wealth

My Opinion on Building Generational Wealth

Most Popular Reply

94 Replies