Building Generational Wealth with a Home Purchase

Passing down an inheritance from one generation to the next is called generational wealth, and real estate property is one of the largest assets that’s included. As you build wealth and your inheritance, consider these tips to maximize a home purchase.

The First Brick in a Legacy

Homebuying establishes the foundation for long-term financial wealth for your family. Real estate usually appreciates over time, resulting in profits that increase generational wealth. When you’re shopping for a home, make sure your decision is based on potential value and not emotions. Approach the decision as an investment that will help you build wealth as your home equity increases.

If you’re starting to save for a home, add a savings goal to your budget for the down payment and other expenses that come with being a homeowner. Most lenders recommend a down payment of 20% of the purchase price, although options are available for smaller down payments. Learn more about planning to buy a home in How Much House Can I Afford? 

Wealth Hides in the Walls

As you pay down your mortgage, your home equity value increases as it’s calculated by the current market value minus the mortgage debt. Build your home’s equity with regular maintenance, renovations, or adding to the square-footage with a bathroom or bedroom. Home improvements that extend the life of your home also raise the value, like replacing the roof, updating flooring, repainting, or refreshing the curb appeal. Replacing older appliances with newer, energy-efficient ones may also add to your home’s value while helping you save money on utility bills.

Don’t Buy for Today

Another approach to buying a home for equity is rental property, whether it’s the basement of a home, half of a duplex, or a smaller property. This strategy generates income to save up for your family home while also building equity in the rental property.

Whether you’re buying for a rental or your own home, research the location of any potential property and compare the market value to other homes in the area. Neighborhoods with highly rated school districts, lower crime rates, and amenities within close distance attract homebuyers. While you’re looking for a home to pass down as an inheritance, the next generation will benefit from these critical details when they eventually sell.

Teaching Wealth by Living It

Children learn by watching and asking questions, and explaining the value of your home is a great start to discussing financial planning and responsibility. While they’ll be excited to know that they may inherit the family farm someday, it’s important to explain how you saved for your home and the expenses they can expect as a homeowner. Talk about financial goals that they have and ways they can achieve them. Texell offers savings accounts for kids and teens with tools that teach them about money management while achieving these goals. Learn more at Texell.org. 

If you plan to leave your house to your children, establish your estate plan with a will or trust. While a will designates a beneficiary and provides instructions on how to distribute your assets, a trust is legally binding and allows you to distribute the title to your children or whomever you want to name as the beneficiary. Consider any taxes and set aside funds to cover these so that you don’t burden your beneficiaries. It’s also recommended that you review your estate plan annually and after any major life or financial changes.

Looking for a Home? Texell's Home Loan Heroes Can Help.

If you are looking to buy a home but don’t know how to start, Texell’s mortgage team helps answer your questions. They’ll walk you through the process and find home loan options¹ that meet your needs. Our team of mortgage experts will walk you through the process. Call 254.779.5104 or visit TexellHomeLoans.com to get started.  

¹ With approved credit. NMLS# 460152