Family Office Strategies: Preserve Wealth with Texas Real Estate
Explore 2 reliable ways in which family office managers plan to preserve wealth for multiple generations specifically using Texas real estate.
For family offices, the goal isn’t just about growing wealth—it’s about preserving it for generations to come. Protecting a family’s financial legacy so it lasts through children, grandchildren, and beyond is a top priority. To do that, family office managers must choose investments that are stable, offer consistent returns, and minimize risks. While traditional options like stocks and bonds play a role, Texas real estate has consistently proven to be a reliable vehicle for multi-generational wealth planning.
Texas real estate is known for its steady growth, long-term appreciation, and a favorable tax environment. In this article, we'll focus on how private debt funds and fractional mortgage ownership in Texas serve as valuable tools for family offices seeking to preserve wealth across multiple generations.
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Why Texas Real Estate is a Great Wealth Preserver
Texas real estate is a smart choice for family wealth preservation. Between 2010 and 2022, home prices in major cities like Austin, Dallas, and Houston surged, with some cities seeing prices more than double. The Texas A&M Real Estate Center reports that Austin’s home prices increased by 123%, while Dallas-Fort Worth saw a 78% rise. These appreciation rates make Texas real estate a reliable option for family offices looking to protect their clients' wealth over time—ensuring that today’s investments grow in value for future generations.
The demand for Texas real estate continues to rise, driven by factors like population growth and corporate relocations. As more companies move to Texas, the real estate market remains strong, making it an attractive option for long-term wealth preservation.
The Stability of Texas Real Estate: A History of Resilience
One big benefit with Texas real estate is its resilience even during downturns. During the 2008 housing crisis, Texas home prices only dropped 2.6%, while the national average fell by almost 20%. This ability to weather tough times ensures that Texas real estate holds its value over time, making it a dependable choice for family office managers who are looking to preserve wealth for their clients’ children and grandchildren.
Over the past decade, Texas real estate has consistently delivered growth rates of 5-7% annually, according to the Federal Housing Finance Agency. This stability makes it an attractive option for family offices aiming to protect wealth through different market cycles and across generations.
Two Excellent Texas Real Estate Investments Options for Family Offices
Private debt funds and fractional mortgage ownership are two reliable ways to invest without the hassle of directly managing properties. These investment vehicles are ideal for family offices focused on preserving wealth for future generations while maintaining flexibility and security.
1. Private Real Estate Debt Funds
Private real estate debt funds pool capital from participants and lend it to property developers or real estate owners. In return, participants receive returns based on the performance of those loans. For family offices, private debt funds offer a steady income stream without the need to manage properties, which is particularly appealing when planning for long-term wealth preservation.
Steady returns: Private real estate debt funds target stable returns. For instance, funds focusing on Texas real estate aim for a 10% annual return. This consistent cash flow helps ensure the preservation of wealth for future generations.
Low volatility: Since these funds are backed by real assets, they tend to be less affected by stock market fluctuations. This stability is crucial when safeguarding family wealth across multiple generations.
2. Fractional Mortgage Ownership
Fractional mortgage ownership allows family offices to directly own a portion of a mortgage on specific properties. Unlike private debt funds, fractional mortgage ownership involves becoming the lender, with participants holding a first-lien position. This means that in the event of default, the lender has the right to foreclose and recover the loan.
Direct control: Family offices can hand-pick specific properties to lend on, allowing for more control over their clients’ investments and ensuring that each asset aligns with their generational wealth planning strategy.
First-lien security: As the first-lien holder, participants have priority in recovering funds, making this option a secure method for preserving wealth. Knowing that their wealth is backed by physical assets helps reassure family offices that these investments will stand the test of time.
Overcoming Common Concerns About Real Estate
While Texas real estate offers excellent potential for multi-generational wealth planning, family offices may still have concerns about liquidity, management, or market risks. Here’s how private debt funds and fractional ownership address those concerns.
1. Liquidity
Real estate investments can be less liquid than stocks or bonds, but private debt funds offer regular cash flow through interest payments. This steady income helps offset liquidity concerns, ensuring wealth preservation without needing to sell assets during market dips.
2. Management Complexity
Managing real estate properties can be time-consuming, and family offices may prefer to avoid this burden. Private debt funds and fractional ownership provide a hands-off solution, with professionals handling loan servicing, borrower vetting, and property oversight. This makes it easier for family offices to focus on the bigger picture of preserving and growing wealth for future generations.
3. Market Volatility
While real estate markets can experience ups and downs, Texas real estate has consistently performed well, even in tough economic times. During the 2008 housing crash, Texas real estate fared much better than the national average. By investing in private debt funds or fractional ownership, family offices benefit from investments backed by real assets, providing an additional layer of security against market volatility.
Capstone Capital Partners is Proud to Support Family Offices with Private Real Estate Investments in Texas
Capstone Capital Partners is a family-owned investment firm right here in Cedar Park, Texas. Our clients are long-term partnerships formed with years of trust. As a family office manager, your clients’ success is also your success – we understand that. Our private real estate offerings are attractive for many reasons, and one of those reasons is our personal, trustworthy way of doing business.
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