Ready, set, go. The greatest wealth transfer in history, some $80 trillion +, is about to occur and investors, particularly Commercial Real Estate (CRE) investors, are woefully unprepared.
If you think making good investment decisions on a multimillion-dollar stock and bond portfolio is tough, wait until mom and dad drop 500 apartment units in your lap: Yikes!
Dubbed the Great Wealth Transfer, the shift of assets from older generations to millennials and Generation Z which is about to begin may profoundly reshape financial influence and spending in America.
In 2024 the Silent Generation and Baby Boomers represented 25% of the population while controlling over 65% of the wealth. (WSJ 4/25/25)
Much as we would like to think we are prepared, we’re not. Few people enjoy contemplating their own mortality while even fewer prepare for it. The kind of ego it takes to create outsized wealth in a hyper-competitive economy like ours, doesn’t like to admit it may all be for naught when they pass.
Subconsciously we all like to think that somehow, we’ll beat it. Isn’t that what the whole longevity industry is about? Hell yes, we can slow down or reverse the aging process! With all our technology, we can do anything. Isn’t that what pill-popping Elon tells us?
This industry is experiencing rapid growth and investment driven in large part by the aging global population.
Hate to pop that bubble, but the average life span in this country is getting shorter not longer. So, despite all the money and hype, we’re still all gonna die, sooner now rather than later.
Over the past three decades, boomers, Gen X and millennials have grown much wealthier. The silent generation’s overall share of wealth has shrunk from 70% to just 10% during that same time frame. Unsurprisingly, that’s what happens when you die. (WSJ 4/25/25)
Boomers are now the wealthiest generation, holding over 52% of all wealth: much of that ($42 T) in real estate and securities. (WSJ 4/25/25)
Lack of succession planning where this is concerned can be a real problem. This is particularly true given most planning done is without consultation of the heirs.
When this wealth is manifested in real estate problems are compounded. This is because many heirs have had little or nothing to do with the acquisition and management of these properties.
Building wealth through the acquisition and management of real property is older than our Republic. As such, it predates the stock market which originated with the Buttonwood Agreement in 1792.
However, it has always been a time, labor, and capital-intensive endeavor. This can have the effect of discouraging subsequent generations’ involvement.
It can feed, cloth, house and educate them. However, in so doing, it also emancipates them to pursue other, less arduous careers.
Therefore, they may be inclined to fire sale mom and dad’s real estate upon receipt of it. After all, they have their own careers to worry about.
A rushed sale of real property is problematic at best. This is because real estate is anchored by interest rates. Rates are cyclical: when they go up, property values can go down and vice versa.
The timing of any property sale is critical to maximizing total return. Even though heirs may want out, if timing is bad, they may have to tough it out instead.
This brings up the management issue. If a quick sale is not an option, the burden of active management must be shouldered. This requires both knowledge and a sophisticated network of relationships. Without this, real headaches may result.
This is where DSTs come in. If you are burdened with a property portfolio you neither want to manage nor have the skill set to do so, why not 1031 exchange into a portfolio of remotely managed DSTs?
Due to the fractional ownership structure of DSTs, you will likely better diversify your real property holdings both functionally and geographically.
Due to the individual nature of DSTs, these properties may be similar to what you already own, albeit more geographically diverse. You can literally handcraft your own portfolio.
No DST property is forever. Management is tasked with striving to provide investors with the best possible total return (income + appreciation) at time of sale.
This can give newly enfranchised property owners some breathing room to time a sale in a more advantageous manner.
If you are a real property owner or about to become one, you should consider DSTs as part of your succession planning process.
