Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
Over the last decade or so, my wife and I have put together a nice little rental portfolio, we've really grown as landlords and property managers, and we have a nice little life that's just getting nicer. Net rental income has almost completely replaced what we used to make in our jobs. We can see the finish line, when we call it quits, sell and put out money into more stable assets, retire to a nice sunny place far from Pittsburgh, and enjoy our lives.
Our one regret is that we didn't have children. It just wasn't in the cards for us. In the beginning, we didn't really know what we were missing, but later, as the assets started to grow in place, we both realized that if we did have children, and we left them what we had, we would more or less be inviting destruction and misery on their heads in most cases. Raising kids when rich is a hard, thankless job, and most rich parents fail miserably at it. I can only imagine in stark terror the mistakes I would have made as a young man if I had had the money to make them.
For those of you who have met with some success and have children, what's the end plan? I know there are some guys here who stay up nights figuring out how to pass generational wealth to their children successfully, looking at you, @Steve Vaughan.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
2y
Ha @Jim K.. Nobody is supposed to know I stay up nights thinking about generational wealth.😎
Interesting enough, my wife and I just did some basic estate planning for the first time recently.
So our 2 young adults (now) grew up around landlording and have been members of our main commercial apts LLC since they were babes. 2%. We used to joke that 50-cent's got nothing on their 2%. They'd rap while they picked up the parking lots. Some things you just do as owners.
Yard work, cleaning, painting, mowing, etc though were paid. They always knew where a dollar came from and they grew with us.
I never use the term 'rich' and honestly don't feel we are. We have had freedom from day jobs for a long time, but mostly because we have so few payments. They don't have payments either and when their car or motorbike needs something, their first action is to get out their own tools and pull up a YT video.
So I think the answer to prevent large sums from wrecking kids is that they are grounded. They have worked for money and appreciate it. They understand money comes in 3 forms- labor, business equity/LLC membership and investment earnings.
One fuels the other, which fuels the other- but the source and foundation is work.
We also enjoy playing 401 Uncle. We seed Roths for our motivated nieces and nephews and plan to establish college and 1st home purchase funds for our future grandkids and grand nieces and nephews. Won't be such a 'burden' on our kids.
Another great source would be @Arlen Chou. I know of him especially on other platforms and his young adult kids are actively buying RE and DiYing like you and I do so much. If anyone can mention him, he would be an awesome resource.
Over the last decade or so, my wife and I have put together a nice little rental portfolio, we've really grown as landlords and property managers, and we have a nice little life that's just getting nicer. Net rental income has almost completely replaced what we used to make in our jobs. We can see the finish line, when we call it quits, sell and put out money into more stable assets, retire to a nice sunny place far from Pittsburgh, and enjoy our lives.
Our one regret is that we didn't have children. It just wasn't in the cards for us. In the beginning, we didn't really know what we were missing, but later, as the assets started to grow in place, we both realized that if we did have children, and we left them what we had, we would more or less be inviting destruction and misery on their heads in most cases. Raising kids when rich is a hard, thankless job, and most rich parents fail miserably at it. I can only imagine in stark terror the mistakes I would have made as a young man if I had had the money to make them.
For those of you who have met with some success and have children, what's the end plan? I know there are some guys here who stay up nights figuring out how to pass generational wealth to their children successfully, looking at you, @Steve Vaughan.
What are the rest of you doing?
I don’t have kids, but I grew up at least in retrospect pretty well off as did both my parents, I am one of the least entitled people I know as are both my parents, that’s attributable to a few things imo, one is just pure personality, I know some people that grew up dirt poor and are extremely entitled and other people that are crazy rich and you’d never know, some of that is just random luck, but I think another key is while we’ve always have had the security that comes with being pretty well off, we’ve going back generations lived below your means, my mom grew up in westchester county New York which is a crazy rich place, my grandmother intentionally moved my mom to a frankly pretty mixed income school district so she didn’t become spoiled, I grew up until I was 13 in a very middle class neighborhood, went to middle class schools, hell my mom up until literally this week drove a 13 year old ford explorer with 155k miles. Your kids don’t have to know your doing well unless you want them too, it wasn’t till I was in my mid 20’s that I came to understand how well off all of us were.
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
2y
@Jim K., first off thanks for starting this thread. It was so good I put off my 2 hour walk that is part of my daily exercise routine. I appreciate your insights, especially into kids who are a waste of skin. I have helped form trusts for pretty rich folks, prosecuted lots of kids from wealthy backgrounds and from poor backgrounds. I have even been a trustee for a fair number of trusts. Extreme wealth in my experience rarely creates extremely competent kids, but it can. One of the most pervasive problems I have seen in kids from wealthy families is drug and alcohol addiction. For some they are just arrogant even when they turn up poor in later years. I have also seen a lot of poor folks with addictions and just plain obnoxious as well. Some kids were the opposite of their folks, some were identical to their folks.
I appreciate the mention by @Steve Vaughan about getting my insight, but when my kids were young I was frankly too busy and too ignorant to pass much wisdom on. I barely had enough for myself. I am pleased with how my children turned out, despite many sleepless nights of wondering if I was doing things right. I suppose the quality of my children is a mix of picking a woman who was a great mom and luck. Here are a few things that I think I did right.
I grew up nearly desperately poor. I finished my last year of high school on my own living in my car sometimes. I made my own money bought my own car and groceries. My kids earned what they spent. They had an old car to drive. If they wanted a nicer one they worked and earned it. They made payments with no help from me.
They learned by watching. Saying the right thing is not nearly as important as them watching the right thing. My kids never saw me do any illegal substance, or have more than 2 drinks in the same week. I understood that everyone can make mistakes. There was usually a lecture, if you made the same mistake twice it got ugly because you didn't learn your lesson so the penalty got ramped up.
I had standards and enforced them. If you wanted to go hunting with dad you had to be able to gather materials, and start a fire with one match. You could not do it, you could not go. You had to be self sufficient. My son once got stranded in the mountains and then an unexpected snowstorm hit. He built a shelter, had a fire, plenty of food, extra clothing, etc. When the storm broke and search and rescue found him he was leading his companion out in perfect shape, warm, and dry, on the trail home in a fairly bad storm.
I always told them the truth. Both children often called me mean. Telling my daughter that just lost a beauty contest that she had done very well in, that being a model or beauty queen was vain and more a freak chance of genetics rather than something to be proud of got me no love, but she ended up being valedictorian, and getting nearly a full ride scholarship. Telling my son who wanted to be a professional football player that he would never be a pro football player didn't go over well either. He was a wildland firefighter with the BLM and worked up to being the boss or assistant boss on fires with hundreds of firefighters and engines deployed. After having his own son he finally transferred into parks and recreation so he could be home and see his son grow up.
I really struggled to get a college degree because of cost. Several years saw me only going to college for 4 months and working the other 8 months to save up money. I told both of my kids that they would get a 4 year degree. It would be in anything they desired, and I would pay for it, but they would finish. My son was required to pay his own truck payments and buy his own food. He worked summers as a firefighter to pay for those. When he wanted to quit I went and spent a few days with him in his dorm room explaining why it was the wrong decision.
There were a lot of fights, I am still not sure if that was smart or not. Right was right, wrong was wrong. MY son burnt the clutch out of the truck one night out with friends. He paid the $800 to have it replaced out of his lawn mowing money. At $30 per yard it took awhile to pay for. They had their own bank account even in high school from money they earned, and they balanced it every month. We gave each child $10K for a down payment on a house.
My son hated the rental houses, while my daughter helped me work on them. We never had a new vehicle until I was almost 60 years old, and I nearly had to have counseling to buy that, even though it was in my business and a 100% tax write off.
I try to say things to them and encourage them to be smart about life and money. I feel I fell short in some areas, and great in others. I am proud of how they are raising my grandchildren. Now I have enough wisdom to pass it on, and plan to spend it fully on my grandchildren. My gifts are piggy banks, and money that they earn from me gets put in a Roth IRA for them.
I will leave most of my wealth to my children, but not all. My goal is to train my grandchildren and create generational wealth. In the end I can only give them the chance to be amazing, I cannot force it, but I can give them a greater range of choices than I had. I cannot put them into the dire financial condition I started in, but I can teach them my values. After that it's up to them.
Thank you everyone who posted I really enjoyed this thread.
@Jim K., first off thanks for starting this thread. It was so good I put off my 2
If your kids beg you to hunting they are going to be just fine.
I always felt like it must suck to be a rich kid, or born to an affluent family as we don't want hurt anyones feelings. It would be very difficult to make your life more comfortable then you parents made it for you. Then on top of that even if you build on what you inherited, were given, or worked your *** off for everyone is just going to say your dad gave it to you. Sucks being poor to I guess, although for different reasons.
That is completely how I see things. What a sad thing to be saddled with the financial legacy of your parents to that extent, to have that grinding on you all your life.
Investor · Irvine, CA · Member since 2014 · 46 posts · 30 votes
2y
I do think about this issue. Unlike you I have one child. Mine is almost 16 but involved in some investing which includes far more than just real estate. My child is already involved in stock trading and commodities and has taken finance and accounting classes. When I look at some RE deals I get her involved. When I trade a stock we talk about it and go over the financials. We talk about and discuss different types of collectables.
I'm not too worried about having a trust fund kid because my kid is not that way and because of how I am structuring things. Like many I started with zero so I take this on with a great sense of responsibility.
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
2y
@Steve Vaughan thank you for the shout out! I started REI with the intent of generational wealth, that included passing knowledge on to my children. I wasn't looking to build wealth for myself, I wanted to build a foundation where my children could build real wealth. It just turned out that I have been able to create a pretty good life for my family along the way.
I started off with subtle clues for the kids from a very young age. Every month I would layout the "mailbox money" on the dinner table and get things ready to deposit. Eventually, they got to the age where they would ask what I was doing and I would explain where this money was coming from. Time would pass, but they remembered the idea of "mailbox money". When other families were buying new cars or going on vacations, I would reference "mailbox money" and explain to them the difference between assets and liabilities.
When my kids were a little older, I started taking them for short periods of time to some of my renovations. Not to work, but to have fun. My thought was that anybody can do demo. One of my fondest memories was taking my 10 year old son and 12 year old daughter to do some demo on a kitchen. It wasn't about being efficient or doing it right, it was about making it fun. I put eye and ear protection on the kids and handed a hammer to my daughter and an old baseball bat to my son and told them to go to town. At first they didn't understand, but I took the bat and took a full swing at a cabinet. After that, they were booth hooked on demo. Another time, I told them we were going to paint some "graffiti". We went into a unit, and I handed them paint brushes and a bucket of primer and told them to paint what they want wherever they wanted. Teaching like this slows down the renovation process, but when the goal is generational wealth building, a week or a month delay is nothing.
They were never obligated to help and I never forced them to do work. They just naturally migrated to it as they learned the difference between assets and liabilities and how sweat equity can accelerate the process of wealth building.
During the covid lock downs, I had them read "Rich Dad, Poor Dad" and write a report for me. They got paid to read it but they came away with a good understanding of the base concepts. Now whenever we go on vacation or I take time off mid-week to do something with them, I explain to them the reason I can do that, but many parents cannot, is that I own my own business and we own assets with reasonable liabilities. My goal has always been to raise my children to have time freedom and I tell them that cannot be done as an employee.
Now that they are in their 20's I am stepping them through the process of buying properties. The first property I find and negotiate for them. They are their through the entire process and learn by watching. My son is on his first property, but my daughter is on her second. In the second step, we discussed what type of attributes she wanted and I found several properties. It was her decision to make on which property to purchase from the "short list" and what the offer price would be. I advised on the negotiations, but let her make the final call. The third and final step will be when they do all of the foot work. I will again take an advisory role, but they will drive the project from start to finish.
Through the entire process we discuss financing and the banking process. I understand to many on BP the goal is to replace income with "mailbox money." But I explain to them that having a W2 at the beginning is a good thing. It is needed to get loans, and early jobs are good places to learn what not to do. Hopefully, they will transition to owners of businesses and then eventually to investors.
As a final tool for knowledge transfer, I use social media as a living archive of what we do in real estate as a family. I don't post for likes or followers, I post so that my children and hopefully my grandchildren can see how the wealth was built over time. They can see the progress they have made over the years and hopefully it will help build confidence in them for those dark days all real estate investors eventually encounter.
@Jim K. I hope that my journey helps you and anybody else that stumbles upon my post.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
2y
@Arlen Chou very cool. Thank you for sharing this. Your why that you got into RE and attitude towards your kids and investing is unique and most excellent. Also I'm sure the reason they've dove in.
My older son painted his first closet when he was 9. Just put a poncho and big goggles on him and let him go.
My younger one was about 12 when he karate-kicked his first wall. It fell mightily on the 3rd kick and is a happy memory for both of us now. Thanks again!
When my kids were a little older, I started taking them for short periods of time to some of my renovations. Not to work, but to have fun. My thought was that anybody can do demo. One of my fondest memories was taking my 10 year old son and 12 year old daughter to do some demo on a kitchen. It wasn't about being efficient or doing it right, it was about making it fun. I put eye and ear protection on the kids and handed a hammer to my daughter and an old baseball bat to my son and told them to go to town. At first they didn't understand, but I took the bat and took a full swing at a cabinet. After that, they were booth hooked on demo. Another time, I told them we were going to paint some "graffiti". We went into a unit, and I handed them paint brushes and a bucket of primer and told them to paint what they want wherever they wanted. Teaching like this slows down the renovation process, but when the goal is generational wealth building, a week or a month delay is nothing.
This is classic. I love it. I'm doing the same with my grandkids. Thanks for sharing.