How Real Estate Investing Can Leave a Legacy

Real estate investing in Toronto is an excellent way to create some passive income streams. While income can help you right now, it’s also a great way to build wealth for future generations as well. After all, property is a limited resource, so most properties will appreciate over time. As asset values rise, so does rental income, and future generations can continue to benefit from rental properties as long as they own them.

how to leave a financial legacy for your family

Real Estate Investing Protects Against Inflation

One way how real estate investing can leave a legacy for multiple generations is through protection against inflation. Inflation is a reality that will never go away. Prices will always go up, although the pace at which they rise may change over time.

Just as prices rise, so will rental prices and property values, so owning rental properties in Toronto is an excellent way to defend against the effects of inflation. If you ever decide to sell the property and invest somewhere else, you will likely bring in more than you paid for it.

Owning rental properties and holding on to them enables you to bring in more and more income over time. Thus, even if your salary doesn’t keep up with inflation, asset prices should, so they provide a sort of hedge against it.

Leaving a Legacy

Many people think about the type of impact they will leave on those left behind when they pass away. This is especially true of parents. However, even those without children often think about leaving a legacy, whether that’s for a non-profit organization of their choice or for someone else who is dear to them.

It’s one thing to leave behind a one-time sum of money or something else that will pay off just once. However, leaving behind some real estate investments provides a steady stream of income for those you leave behind.

Real estate assets don’t just pay off one time if the person who inherits them continues to rent them out. Of course, they always have the option to cash the properties out. However, you can also take the time to set things up in such a way that they are easily manageable for the person you leave them to. Real estate assets offer a long-lasting legacy that will continue to pay off even years after you pass away if the properties continue to be managed wisely.

Real Estate Investing Options for Multiple Generations

There are several different ways to invest in real estate. Each requires a different level of involvement on the part of the owner. Having someone manage the property for you or your beneficiaries will make the process more hands-off, but it also cuts into the income you can expect from it.

Perhaps the easiest type of rental property to manage is a single-family home. Leaving behind just one single-family home that no longer has a mortgage on it can provide an easy way for your beneficiaries to have a mortgage for themselves that’s paid each month with rental income on the owned property. In some cases, your beneficiaries may want to take your home and rent it out instead of selling it.

Another relatively easy option is a duplex or building with up to four units in it. This option is more complicated than a single-family home, but it can also be beneficial because if one unit sits empty, you’re still earning rental income from the other unit or units to cover any lien that might be on the property.

A building with at least five units in it is a bit more complicated because you’re managing more tenants. However, with the complexity comes greater opportunities for investment and rental income.

Once again, if one or two units sit empty, the building should still be able to support itself with income from the other units that are rented out. As cash flow on the property increases and the value of the property increases, this type of building can be quite a significant asset to leave behind for your heirs.

The most complicated type of rental property is a mixed-use property containing a variety of businesses and possibly residential units. This type of property can be beneficial because commercial properties in Toronto tend to have multi-year leases, while residential units may only have a one-year lease. Staggering the leases enables you to keep many, or most of the units occupied at any given time.

There are also other types of rental properties you can invest in, like industrial spaces, self-storage facilities, and short-term rentals via Airbnb. For a completely hands-off approach, you might consider investing in a real estate investment trust.

leaving a legacy for your family

How to Easily Pass on Assets to Future Generations

One thing to keep in mind on how real estate investing can leave a legacy is the fact that you’re leaving your heirs’ assets that require some management and maintenance. If you’ve been managing the properties yourself, you should keep in mind that your heirs may not have the skill or desire to keep doing so, even though they may want to keep the properties to continue taking in the income from them.

Thus, you may wish to take steps to ensure that the properties will continue to be well-managed after you pass away. After all, if the properties aren’t left in good management hands, then you are leaving your heirs a burden rather than an asset.

A high-quality Toronto property management company will provide continuity between generations of ownership. If you’ve been managing your properties on your own, you may want to make arrangements for a management company to take over in the event of your death.

At the very least, you should leave guidance to help your heirs manage the properties or find a good management company to help them. This will ensure that those properties will maintain a steady stream of income for generations to come.

Real estate investing is an excellent way to have a passive revenue stream for yourself and an even better way to ensure that your progeny has passive income after you’re gone.

Sabine Ghali
Sabine Ghali
Helping real estate investors build wealth over time

Sabine Ghali, Managing Director at Buttonwood Property Management, Award Winning Real Estate Broker and an Entrepreneur at heart. Sabine is on a mission to help investors create real estate wealth over time in the Greater Toronto Area. Sabine is published in a number of media outlets, including Toronto Star, The Globe and Mail, Toronto Sun, Entrepreneur, Forbes, and Gulf News, among many others.