Investment Property and the Wealth of Nations

Why are rich people rich and how do they retain their wealth through several generations? In this article we try to examine how real estate as seen in investment property has played a large role in generating large amounts of wealth, how it has also been used to retain wealth to sustain several large clans and what you can use in offshore investments.

Wealth Generation with Investment Property

Forbes magazine once commissioned a study and found that most of the rich people today other than a few high tech entrepreneurs like Bill Gates and the Google founders made their money in real estate. But remains, why is there an allure of Investment Property even today?

This is because traditionally, most people consider Investment Property to be a secure investment and Investment Property prices rarely fall and prices continue to rise. Since real estate mimics economic cycles, rich people start building new properties for others to stay and since the profit margins associated with properties can be quite substantial so their wealth increases with each new Investment Property that they develop and subsequently resell. Thus we learn that at the highest stage, investment property, real estate development and finance all move together to make the rich richer then evern before.

Why the Rich retain their wealth

Many people know of the Hilton empire and think about the taxes that they save each year because of the legal trust structure that holds this wealth together. Actually trusts which are legal devices to shield offshore income from taxes help to protect wealth and prevent an heir of a rich estate from squandering it. One way is by having large trust companies to administer the trust and then allow beneficiaries to get a fixed sum.

But what do most trusts invest in? It is no surprise to note that cash flow investment properties like the famous Hilton hotel chain provide a constant source of cash flow into such structures and as mentioned prevent a few heirs from squandering the proceeds of the trust. Rental Income and Hotel Income from investment properties kept in trusts therefore help rich families retain their wealth from generation to generation. Thus we note that rental income and cash streams from investment properties held by trusts can allow for wealth to be transferred from one generation to the next.

Wealth of Nations and Investment Property

Since property represents a large portion of a nation’s wealth and both the rich and poor people are so enamoured with it, many countries codes and laws have specific legislations protecting and regulating Investment Property. The rich have teams of lawyers working for them when they look for investment property since some of the property codes and statutes in both local and offshore jurisdictions can be potentially fraught with legal loopholes. So if you want to be a wealthy property investor, you need to have good professional advisors since every rich businessman today is as good as the team of advisors that he has working for him.

Copyright © 2006 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author’s information with live links only.)

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