Sustainability is a term we hear most often in relation to environmental efforts rather than wealth management.
But the principle of sustainability – the ability to maintain and grow resources through balanced utilization, benefiting those in the present without compromising future generations – certainly applies to wealth.
As an investor, you want to build on your success. You also don’t want wealth to end with you! So many of us invest for the sake of creating generational wealth and financial stability: if not for us, certainly for our children and their children.
What Is Sustainable Wealth Generation?
Sustainable wealth is very simply wealth that lasts. It’s wealth you can scale, repeat, and preserve in the long term. Wealth is sustainable when it is put to work, growing your net worth and your assets in the present and preserving their value for the future.
When we talk about sustainability in an environmental context, we mean using our natural resources in such a way that they are not depleted and, instead, regenerate for future utilization. You could translate this into finance by talking about concepts like financial stewardship and financial literacy. As we live, we’re going to spend money and participate in the economy. Sustainability means ensuring that economic participation at any level does not deplete or diminish your wealth.
Wealth is steady and reliable. Forget your fluctuating asset values and get-rich-quick schemes. Real estate is the king of growing sustainable wealth. Here’s why:
4 Ways Investing in Real Estate Is a Sustainable Way to Build Wealth
#1 – Passive income & equity.
When you invest in rental property as a buy-and-hold investor, you’re constantly generating wealth in two distinct ways: through monthly passive income and through the building of equity and appreciation. Over time, the value of your property increases. You’ll also pay down existing mortgage debt, which increases your equity in the property until you achieve full ownership.
Passive income is key to financial sustainability. It allows you to continue to earn disposable income long past retirement. You won’t rely solely on savings – savings that don’t last – to get by. And, in the end, you’ll have assets and wealth to pass on.
#2 – Real estate is inflation-proof.
Inflation, of course, makes our money worth less. Putting your money in real estate largely prevents this from happening because the value of real estate grows alongside inflation. Generally speaking, real estate is a highly resilient asset in any stage of the housing or economic cycle. You’re working with an essential asset. You can have peace of mind knowing that the same property, well-taken care of, will be worth more in the future than it is now.
#3 – You can diversify your assets.
Sustainability is all about protecting what you have. You can grow as much as you want, but if you’re not being diligent in risk management, you could run into trouble! The diversification found in a real estate portfolio – diversity in assets, markets, etc. – means that you have multiple streams of income while also reducing overall portfolio risk.
Should a vacancy occur, having multiple income-generating rental properties will ease your financial burden until you secure a new resident.
#4 – You can easily duplicate success.
What makes something reliable? There are many answers, but we would argue that replicability is the most important factor. You don’t want your financial future to rely on luck or on being in the right place at the right time. Investing in real estate is scalable – something you can repeat time and time again, no matter how many properties you own.
Not only that, but you can invest in real estate and find success at virtually any time. No matter where the economy is in the cycle or where the housing market rests, there will always be opportunities.
The Bottom Line
If you want to achieve sustainable wealth, you must be diligent and intentional. It takes years, even decades, to build up to that level. Real estate may give you all of the tools to acquire sustainable income and assets, but it won’t just happen.
As an investor, you’ve got to partner with the right people. People who are invested in your success, people who know this business. People who demonstrate success time and time again. You have the tools at your fingertips. So learn how to use them, and use them well!
Start building sustainable wealth with REI Nation!