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3 Part breakdown of Generational Wealth

3 part breakdown Generational Wealth

Generational Wealth is a phrase that has been tossed around a lot in the last few years. While I’m happy the topic is being brought up, I worry about a few things. I’d like to address these things in hopes that by the end of this, you, my dear reader, would have a better understanding of Generational Wealth and why it is very important. 

Do we understand what Generational Wealth is?

The most basic definition of generational wealth is wealth that is passed down from generation to generation. Usually each generation adds to that wealth before passing it down to the next. Yes, there have been cases where generational wealth gets depleted by a recipient of that wealth but even then the opportunity to recover is greater (but we will get to that later). So what are some of the things that create generational wealth and can be passed down? Well some of the obvious ones are real estate, family businesses and investments. Some of the others that are not so obvious are collectibles/antiques/heirlooms, savings, life insurance policies and even cold hard cash. Each of these verticals of wealth comes with a range of difficulty to entry, meaning some are easier to obtain than the others. In the same token some have a far greater impact than the others. For the purpose of the rest of this article we will be focusing on….you guessed it REAL ESTATE.

Why is it important?

There is a saying “I’d rather be rich and miserable than poor and miserable”. I absolutely agree with this. Now I’m not saying people should go out and be miserable for the sake of money nor am I about to preach the gospel of wealth but for me this quote really hit home when I started having children. I started to think about what kind of life I had lived up until my first son was born. Growing up I was considered upper middle class. My wonderful parents came up from nothing and made something of themselves using real estate as the primary means to achieve wealth. My parents weren’t billionaires but they had accumulated a substantial amount where my 4 sisters, 3 brothers and I not only enjoyed a life without want but also enjoyed some extra comforts as well. One thing my parents DID NOT do was pass any of that wealth down to me nor used it once I graduated high school. They did not pay for my college, they did not help me buy my first home, the most they’ve ever done was buy my first car. So when I graduated at 16 and turned 17 a month later I set off to college 5 hrs away from home and nearly crashed and burned. I was cut off financially. I had experienced poverty for the first time in my life. You see, it was my parents’ belief that if I were to go out into the world I had to learn how to make it on my own without any financial backing. It would make me a stronger, more resourceful woman. The wealth they accumulated was to be used to make sure I had a good life while I lived under their roof and prepare me for the world, hence the car and Catholic school tuition. Needless to say my parents did not understand generational wealth. Side note: I had a wonderful childhood and wonderful relationship with my parents and I always had the option of coming back home and living under their roof.

My wonderful Parents

Me at FIU dorm

My Navy days

So I found myself a poor and homeless college student doing what I could to survive until graduation. I joined the Navy in my last year of college and finished up my degree virtually while I was in Japan. Now I mentioned that when my first son was born I really started to consider generational wealth. I started to think about what would have happened if my parents had used their wealth to help me out during my college years. I definitely would have never struggled nor experienced the statistical things women face during periods of homelessness. I probably wouldn’t have joined the military (which I’m so happy I did). While I’m grateful and proud of how far I’ve come in life on my own and with a little help from Uncle Sam, I KNOW that I do NOT want my children to struggle the way I did. I wanted to accumulate wealth so that not only I have something to pass down to my children but as they grow I can give them the advantages I had when I was living with my parents and the advantages I didn’t have when I left for school.  

When I left the Navy and started my company I began to research the verticals of generational wealth, naturally I decided to accumulate wealth the way my parents did with real estate. These are the factors that led up to that decision. 

  1. Real Estate is the most impactful vertical of creating generational wealth. It was something I could do myself. All the others would have had to be passed down to me or I would have had to have the money already to make investments. As we discussed I had neither. Also making sound investments also came with a level of education I was not prepared for nor had the time to learn.
  2. Purchasing my first home served as a dual purpose. Not only is it a great investment but a stable home for my children. No more renting, the constant moving and subject to rent increases regardless of whether or not my salary increased. Not to mention the numerous studies about the health and well being of children who grow up in a stable home vs those who face housing insecurities.
  3. Purchasing a home now gave me greater borrowing power. I now had an asset I could use as collateral or tap into my equity should I find myself in need of a loan to fund my business, pay off debt, pay for my children’s college or make investments.
  4. God forbid I should find myself without a job suddenly, banks are more flexible in working with homeowners to retain their home rather than landlords who are quick to serve you with a 30 day notice.
  5. Purchasing a home and being credit worthy gave me a greater opportunity to buy investment properties. (This is what my parent did and what I am currently doing)
  6. Lastly it is something tangible I can pass down to my children and they can enjoy all of the above.

What can we do to obtain generational wealth and close the gap?

It wasn’t until I started to notice my leads were coming back as non qualified did I think of generational wealth beyond myself and my family. I noticed also that it was mostly Black and Brown people coming back denied. Upon further research (by research I mean I went down a rabbit hole) I found that Black borrowers were significantly more likely to be denied a mortgage than those from other demographics. I found an article published by Zillow that read “Data from the Home Mortgage Disclosure Act showed that lenders denied mortgages for Black applicants at a rate 80% higher than their white peers and more than double (120%) the rate when applying for conventional loans”.(1)   So we have a group of people who went through more than 300 years of racist and exploitative housing policies and here we are today the same group of people facing ridiculous barriers to home ownership. 

Home ownership for the majority of Black and Brown people is the only viable way to build generational wealth and close that gap but they can’t. Becoming a broker myself I understand that we can’t just willy nilly give homes to people and some rules and regulations are there to not only protect against default but also to make sure the home buyer is protected as well. In my search I realized that everyone in the industry knew these barriers existed and it was a major problem. It wasn’t until I read these words from HUD (Department of Housing and Development) “Despite the Administration’s actions, it is clear that continuation of the increases in minority home ownership that occurred during the economic environment of the 1990s is not assured for the future. Private sector actors involved in the real estate and mortgage lending industries will need to increase their levels of product innovation and marketing to minority families in order to sustain these growth rates.(2) They were talking about me. I’m a “Private sector actor” and this was my call to action. It was simple for me. Remove the barriers to home ownership, create generational wealth. My innovation is our dual solution software. The Home Program App for the borrow and Home Pros LOS for the lenders.


Footnotes

  1. Champion Lender is referencing a Zillow® analysis report that used the Home Mortgage Disclosure Act (HMDA) data from 2017 to analyze the denial rates of mortgages along racial lines. The HMDA data was used at the ZIP code level, along with demographic data from the 2017 US Census Bureau’s 5-year American Community Survey (ACS) to determine the racial population makeup for ZIP codes.
  2. Champion Lender is referring to a report by HUD which can be found here. 

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5 Ways to Avoid Being House Poor

5 Ways to Avoid Being House Poor

Refrigerator

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5 Tips for AFTER you move in

Change your air filter!!!!

5 things you should know AFTER you move into your new home

YOU MADE IT! You did! The stress is over, the tears of joy and maybe a little panic have been shed. You’ve probably cracked open that bottle of wine (or if you are like me that beer) and sat on a box in your probably empty living room and just took it all in. Now what? If this is your first home and you didn’t have a lot of support about what to do about what happens after the home buying process, have no fear, I made all of the mistakes, or as I like to call them “discoveries” for you. Read carefully and enjoy.

Get to know your neighbors.

This is one of those things that doesn’t happen anymore but I cannot stress doing this enough. We’ve all seen this in movies. Someone moves into the neighborhood and immediately the door bell rings and there’s this family with a creepy smile and some casserole or baked goods in their hands welcoming you into the neighborhood. Yeah, that doesn’t happen in real life. The most you will get as you are unloading your UHaul is the neighbors outside pretending to water their driveways to get a peek at who moved into the new house and maybe a wave. Seize that opportunity to walk over and introduce yourself. You wouldn’t believe the things I found out in one conversation. I got all the tea. I bought my house in Orlando, FL sight unseen from the un-comfort of my tiny apartment in San Diego, CA. I was completely dependent on my realtor to give me the scoop and have my back on whether or not this was a good choice and she didn’t I just lucked out…barely. My lovely neighbors let me know which vendors wouldn’t rip me off, they let me know where I can take my children to have fun and which place to stay away from, they let me know the real history of the home and that my house was a rental (something my realtor failed to tell me) which explained why the home was in such disrepair and why everyone in the community seemed so thrilled to have us move in. They also gladly watch my home when I travel. Get to know your neighbors.

Read your paperwork

I know you are probably exhausted of paperwork by now. I know I was as well but listen to me when I tell you to read your paperwork. It was but just one week into becoming a brand new home owner did my washer, dryer and fridge broke on me. I was planning on replacing these appliances anyway but I wasn’t ready to do it so soon and it wasn’t quite in the budget yet but these were major appliances. So I moved some money around from my remodeling budget ( which we will talk about next) ran over to what became my second home, The Home Depot and gave up my left kidney…I mean swiped my card and took home a brand new washer and dryer set plus the 4 piece kitchen appliance set. No big deal right? WRONG. My wife was shuffling through the papers the following week and asked me why we had two home owner’s insurance policies. I thought to myself that couldn’t be right so I picked up the paper and began to read Home Warranty and in this Home Warranty that the seller graciously had paid for included appliances should they break. I broke. You think I would learn my lesson. Oh no. When you become a home owner, you receive tons of mail. Some of it looks very official, very urgent and makes it look like you forgot to order and pay for title things. READ IT ALL THE WAY. I can’t tell you how many times I panicked and began to fill out a check before realizing it was just an advertisement of a service trying to get me to pay for documents you don’t need and all ready have. Save yourself time and money and frustration and just read your paperwork.

Don’t rush the remodel

The home improvement shows ruined me. I’m just going to get that out of the way. I think for me, the most exciting part of becoming a home owner is getting to turn the house into a home. Design it how I would like it to be designed and pretending I’m on one of those shows I binge on tv. I didn’t really have a budget in mind I just knew that once I set foot in the home the first thing I would do was tear it up. (See photos) And that is what I did. I got to the point that I lived in Home Depot they knew me by my first name. A few tips. Get a Home Depot credit card. If you don’t have a lot of credit cards already this will help with your cash flow. Trust me you will need to conserve your cash as unexpected things will come up. This will also help you build more on your credit, just make sure to not max it out right away and to pay it on time. When I first moved it I made sure to do almost every room in the house at the same time one right after the other. It was pure madness. No I’m not rich, yes my wife and kids voted me off the island. I quickly blew through my budget even as I was doing most of the work myself and ended up leaving some rooms unfinished because of it. My suggestion is to choose one maybe two smaller projects every 6 months to a year. Take your time. Your home is not going anywhere. Remember there are a lot of new expenses that come with a home. In my case, as you read above all new appliances. Plan out your budget, put in a little padding for incidentals but STICK TO IT. If it doesn’t work for your budget don’t do it. Be mindful of how much you are putting into your home because oftentimes the value you feel you are putting into your home, you will not get in resale value. For example do not put in $150K into your kitchen alone when your whole house is only worth $120K and the house next door only sold for $110K yesterday. Be realistic.

Contractor Vetting

So I have always been known to be pretty handy and I’m glad I saved myself some money by doing a lot of the work myself, however I couldn’t do everything myself.

Change your air filter!!!!

This was a $10k mistake.

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Licensed in: FL,CA,CO,VA,TX

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Licensed in: FL

© copyright 2022 by Champion Lender Inc.

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