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There are many ways to create generational wealth, and real estate is among the most established ways families have built it.
Urban Institute research has tied homeownership to financial security, with property making up an important part of household wealth for many families. And the amount set to move between generations is enormous, with Cerulli Associates projecting that $124 trillion will transfer through 2048 and $105 trillion will go to heirs.
A transfer of that size puts more focus on preserving family wealth, so more of what has been built remains available for the people who eventually inherit it. Preserving that wealth also shapes how experienced real estate investors approach ownership.
Across multiple market cycles, Buchanan Street Partners has observed that long-term success in real estate is often driven less by predicting short-term market movements and more by disciplined ownership, allowing income to compound and investments to appreciate over time and tax-efficiently.
The financial value behind that disciplined approach starts with how real estate builds wealth while an investor owns it.
Real estate has always been a cornerstone of long-term wealth creation, with property producing value through rising prices and income.
The National Association of Realtors reports that between the third quarters of 2014 and 2024, the typical homeowner gained $201,600 from price appreciation. And mortgage principal payments build on those gains by increasing equity.
But beyond price growth, rental property adds recurring income, with a July 2026 review noting that income has historically accounted for 70% to 80% of apartment returns. Tax treatment extends those financial benefits, with depreciation and other provisions allowing a significant portion of real estate distributions to be tax-deferred.
Along with those tax benefits, lease renewals give property owners opportunities to adjust rents as costs rise, helping rental income respond to inflation. And since direct real estate returns have historically moved differently from stocks, adding property gives investors another source of return outside the stock market.
The beauty of real estate is that there is more than one way to invest, and Yahoo Finance notes that options vary by budget and how hands-on an investor wants to be.
At one end of the spectrum is direct ownership. You’re the landlord, property manager, leasing agent, and sometimes the plumber. You’re fielding tenant calls after hours, coordinating repairs, collecting rent, and handling every detail required to execute the business plan.
In the middle sits private real estate. Investors can access larger, institutional-quality properties while outsourcing day-to-day operations to experienced real estate professionals. You remain invested in the property’s success and enjoy the tax benefits without personally managing tenants, maintenance issues, or capital projects.
At the other end are publicly traded real estate investment trusts (REITs). With a few clicks in a brokerage account, investors gain exposure to diversified real estate portfolios.
Interestingly, not many people know that individual investors have access to institutionally managed real estate without buying or operating an entire property themselves. PwC describes institutional-grade real estate as property sought by institutional buyers and meeting common institutional investment standards.
Within that standard, professional teams handle sourcing and due diligence before a purchase, screening properties before capital is committed.
The same teams then oversee leasing and operations, so investors are not personally handling tenants or repairs. And with those duties handled, commingled funds spread an investor’s money across multiple properties and provide access to commercial properties that would be difficult to buy alone.
Managing many properties also gives an investment firm more bargaining power with lenders and insurers, helping it secure better loan terms and pricing. And with several professionals involved in managing the investments, decisions do not depend on one person staying involved over time.
But even with those responsibilities handled, the way an investment is owned still affects how income is distributed and how much of it an investor ultimately keeps.
Tax considerations are central to real estate wealth strategies, since taxes affect how much income investors keep. A major part of that tax treatment comes from depreciation, which the IRS describes as recovering an income-producing property’s cost through yearly deductions. Industry experts note that those deductions often defer tax on real estate distributions.
The tax code also recognizes some of the costs that come with owning the property, with mortgage interest and many operating expenses deductible under IRS rules.
Depreciation can also be accelerated, as cost segregation places qualifying property components into shorter depreciation periods, and bonus depreciation currently allows a 100% first-year deduction for certain qualified property.
During ownership, depreciation and other factors can help reduce an investor’s taxable income, potentially allowing a larger portion of property cash flow to be tax deferred. Beyond the benefits available while holding the asset, long-term real estate investors may also qualify for favorable capital gains treatment when they sell. Real estate held for more than one year generally receives long-term capital-gains treatment, although a portion of the gain attributable to prior depreciation deductions may be subject to depreciation recapture.
Instead of recognizing that gain immediately, investors also use qualifying 1031 exchanges to defer it by exchanging investment real estate for other like-kind real estate. If property is held until it passes to heirs, a step-up in basis generally resets its tax basis to fair market value at death, often reducing later taxable gain.
REIT investors follow separate rules, with eligible taxpayers qualifying for a Section 199A deduction on qualified REIT dividends. REIT shareholders generally do not receive the same direct benefit from property-level depreciation deductions or access to tax-deferral strategies such as 1031 exchanges. In exchange for greater liquidity and convenience, REIT investors may face a different after-tax profile than investors in directly owned or privately held real estate.
Given how much goes into building a family legacy, combining different property investments starts with matching each choice to a family’s income needs and long-term goals. Real estate investment managers who work with family enterprises point to diversified investing and tax-efficient growth as important parts of building wealth across multiple generations.
Keeping those investments aligned over many years requires consistency in how they are managed, especially as family circumstances and decision-makers change. Institutional real estate managers support that consistency through ongoing underwriting and asset management rather than leaving each investment dependent on one person’s involvement.
Maintaining that consistency also depends on the people who eventually inherit responsibility, since understanding why the family owns certain investments helps guide how they are managed.
Preparing the next generation means leaving more than financial resources behind. It means creating a portfolio that can continue serving the family long after today’s decision-makers are gone. By combining income generation, growth potential, diversification, and tax efficiency, real estate can play a meaningful role in preserving wealth across generations and help build a lasting legacy that future family members can understand, steward, and benefit from for decades to come.
This story was produced by Buchanan Street Partners and reviewed and distributed by Stacker.
