If one of your goals is to build generational wealth — assets that can be passed down to future generations — consider adding private commercial lender real estate into your portfolio mix.
With a strategic CRE investment plan, you can create a lasting legacy for your family.
Whether you’re interested in hands-on ownership of multifamily properties/commercial buildings or prefer a more passive approach through REITs, there are multiple ways to grow your wealth with commercial properties.
Understanding the nuances of CRE investment is critical to maximizing your returns and securing your family’s financial future.
Understanding generational wealth
On the surface, creating generational wealth simply means acquiring assets you can pass down to your children and grandchildren.
But it’s not just about that. It’s about building a sustainable financial foundation that empowers them. By forging a legacy of economic stability and opportunity, you can set the stage for future generations to achieve greater financial independence and security.
Used correctly, commercial real estate can provide much-wanted personal wealth while providing opportunities to create riches that can span several generations.
The focus is not merely on wealth accumulation anymore — the bigger goal is to strategically build and maintain a diversified CRE portfolio that can generate consistent cash flow and appreciate in value over time.
How commercial real estate investments can impact generational wealth
Did you know that of all wealth creation methods, commercial real estate is among the commonly used strategies for building generational wealth?
That’s because CRE provides immediate cash flow and long-term capital gain opportunities. From warehouses to office buildings, serious investors who want to create financial legacies add CRE to their strategy.
How can passive CRE investment build generational wealth? Here’s a simplified example: In the initial phase (the first five years), you can focus on acquiring and stabilizing commercial properties to establish a cash flow foundation while allowing your initial investment to grow.
Over the next 6 to 10 years, you can leverage the equity built to diversify your investments and increase income streams.
And finally, you can dedicate the next ten years to strategic wealth management and estate planning, safeguarding your assets for your heirs and their future heirs.
What’s the difference between generational and personal wealth?
Knowing how to distinguish between generational and personal wealth can help switch your mindset and help you establish a solid financial legacy:
- Personal wealth is focused on your current and near-future needs. These assets are mainly for your comfort and lifestyle.
- Generational wealth takes a long-term perspective. The goal of these assets is to secure the financial independence and prosperity of your descendants.
It’s not merely about having sufficient money down the road but about creating a legacy that involves multi-class investments.
Building generational wealth also means establishing a cornerstone of financial education that can be handed down to future generations.
Essentially, generational wealth is about:
- Pinpointing and prioritizing investments that can deliver sustainable growth.
- Applying tax optimization, estate planning, and other strategies to preserve wealth.
- Actively teaching the next generation on investment principles and financial management.
Should you invest in a real estate syndication to build generational wealth?
Real estate syndications offer unique opportunities for building generational wealth using commercial real estate.
By working together, different investors can pool their resources to buy properties that would be challenging to afford individually. This gives them access to high-priced commercial assets while distributing risk across every investor.
In some ways, it’s a less risky way to invest in commercial properties. Just carefully evaluate syndication opportunities and ensure they align with your long-term wealth-building goals. It’s also essential to understand how this arrangement can benefit you.
What is a CRE syndication?
A real estate syndication is a collective investment model that involves multiple investors pooling their funds to buy and manage commercial properties, such as large apartment complexes, office spaces, and shopping centers.
This collaborative effort can lead to opportunities that are traditionally available only to institutional investors and the extremely wealthy.
Investors who can successfully navigate the nuances of this investment tool can unlock asset growth and rewarding revenue streams, bringing them closer to achieving the goal of building generational wealth.
Advantages of pooling resources
Real estate syndications level the playing field because it lets individual investors partake in a profitable commercial property venture that might otherwise be too expensive to afford alone.
With a collective approach, investors can diversify risk and boost their buying power.
How to evaluate syndication opportunities to build long-term wealth
This involves due diligence and careful analysis. Investors must assess a commercial real estate property’s potential while understanding factors like rental income prospects, market dynamics, and potential for long-term appreciation.
To succeed, they must pick suitable properties and reliable management teams, ensuring they align with their wealth-building goals.
Is it a good idea to invest in multifamily properties to build generational wealth?
Multifamily properties are a cornerstone investment for many successful investors with substantial wealth.
These commercial real estate investments maximize the essence of value and income growth by providing a distinct blend of stability and scalability.
Investing in one introduces an in-demand asset class into your portfolio — providing a more predictable cash flow while being less volatile.
The key is to find a profitable property in a high-growth market, particularly in areas that demonstrate strong job growth, increasing population, and rising rental rates.
Partnering with a seasoned real estate agent specializing in multifamily properties can help you identify promising investment opportunities and navigate the complex buying process.
You must also work with a reliable commercial real estate lender who can provide competitive financing terms and expedite the loan approval process. And finally, you need an efficient property management team for sustained wealth growth and property value appreciation.
Should you invest in Real Estate Investment Trusts (REITs) to build generational wealth?
REITs allow you to be part of the commercial real estate market without directly purchasing, financing, or managing any properties.
Real Estate Investment Trusts pool money from several investors to buy a portfolio of income-generating properties, such as office buildings and malls. By investing in REITs, you can diversify your investment across various assets while building generational wealth.
Choosing the right REIT can impact your success in this venture. It must match your risk tolerance and financial objectives while having a track record of solid performance in CRE sectors minimally susceptible to economic downturns, such as essential retail and healthcare.
With strategic choices, you can achieve long-term financial stability and growth to build generational wealth effectively.
Pros and cons of REITs
REITs offer investors exposure to the commercial real estate market through a passive investment model.
By purchasing REIT shares, you can potentially benefit from property value appreciation and regular dividend income. Keep in mind, however, that REITs are susceptible to market fluctuations and interest rate changes, which can impact investment returns.
Can the BRRRR investment strategy help you build generational wealth?
Buy, Rehab, Rent, Refinance, Repeat (BRRRR) is an investment strategy in commercial real estate that can help fast-track your journey to generational wealth.
It means purchasing undervalued properties, renovating them, and then converting them into rental income generators that you can refinance to extract equity. You can then invest this capital into additional properties and create a compounding effect that fuels long-term financial growth.
BRRRR pros and cons
If you have the discipline to reinvest your profits into new properties, you can grow your portfolio over time. This strategy allows you to build a legacy that can provide financial security for your family for generations to come.
However, it’s also important to understand that BRRRR has potential drawbacks. Rehabilitation can be expensive and time-consuming. If you don’t have much experience, unexpected issues may end up increasing your costs significantly.
Unlocking generational wealth via commercial real estate
Building generational wealth for a multidimensional approach. You need to commit to a long-term investment mindset in order to grow and sustain your wealth over generations.
The process also involves a lot of meticulous financial and legal planning to ensure that your assets can truly benefit future family members and withstand economic downturns and market fluctuations over time.
Commercial real estate can provide a solid path to generational wealth, especially when you choose an investment that delivers long-term capital appreciation and immediate cash flow.
By using real estate syndication, diversifying investment portfolios, and other strategies, you can spread investment risks and gain access to commercial properties.
And if you are an experienced CRE investor, the BRRRR method can help you create a cycle of reinvestment and build wealth faster.
All this said, CRE investing does not guarantee long-term wealth. You need careful financial and legal planning to grow and protect your assets as it passes from one generation to the next. It’s also important to educate future generations on CRE investing and financial management to sustain your family’s wealth.
Get started
Here at Private Capital Investors, we can help you on your journey to building generational wealth with our suite of commercial real estate loans.
Contact us at 972-865-6206 or explore our website to learn more about our CRE alternative lending solutions.
