Buying a home early has long been part of the American dream. But in Los Angeles, Hollywood nepo babies often buy more than a modest one-story ranch. “Think of it as a starter home,” says Paul Lester, partner at The Agency. “But an entry-level home in another community somewhere in the U.S. is very different than what we’re talking about — it’s an entry-level home for $3 million to $4 million.”
Case in point: Don Henley purchased an eco-friendly, open-concept entry-level home in Mar Vista last year for his 20-year-old son, Will $4.3 million. In April of this year, model Presley Gerber – the 23-year-old offspring of Cindy Crawford and Rande Gerber – shopped $3.4 million Mid-century home in Beverly Hills.
And then there’s Jordan McGraw, whose parents, Dr. Phil and Robin McGraw, reportedly gave him a great gift in 2020 – a 10 million dollars Beverly Hills mansion.
All over LA, Nepo babies are on a property buying spree. Some get help from their famous families with their shopping; others invest their own money.
“It’s not a new concept for people to buy houses for their children at a young age,” notes Douglas Elliman’s Josh Flagg, one of the stars of Million Dollar Listing in Los Angeles. But he adds: “With the increasing wealth in today’s world, it has become more normalized and less unique than it used to be.” I think there is an entitlement aspect that is a little more pronounced than it used to be, with parents prioritizing their hard work over just that Buying houses for their children.”
Lester adds that wealthy clients are increasingly viewing LA homes as a safe investment. “I think there is more focus on real estate ownership among the second and third tiers of families than perhaps ever before,” he says. “Families who already own legacy properties or have done well in real estate will want the family to continue ownership in Los Angeles as it continues to prove to be a source of great investments.”
In an uncertain economy, real estate is also seen as a safer way to retain assets and generate income through rental or exchange. “When a family is wealthy and has business acumen, they pass that on to their children, and often that starts with purchasing a property,” says Tomer Fridman of The Fridman Group at Compass. “Many of my high-net-worth clients have significant assets in real estate, and their children start buying real estate at an early age.”
Although this trend is particularly visible in LA, the transfer of wealth from generation to generation is reaching epic heights. In what economists call the “great wealth transfer,” rich, aging baby boomers are increasingly bequeathing money and property to their children and grandchildren, known as lifetime giving. According to the firm Cerulli and Associates, baby boomers in the top 1.5 percent of households will bequeath about $35.8 trillion over the next decade, many of it before they die.
Real estate agents also point out that offspring who buy real estate generally buy homes that are smaller than their parents’ but with a similar style (for example, Gerber’s modern home is reminiscent of his parents’ former mid-century mansion in Beverly Hills). “The type of architecture that belongs to the parents is often duplicated in the second generation,” says Lester. “For example, if you have a Neutra or a Schindler…it’s very likely that the kids…are looking for something similar.”
Of course, when the older generation of a family buys houses for the younger generation, there are sometimes strings attached. As Lester notes, he recently helped a family that owns a home in LA buy a home in Malibu. “It was intended more as a children’s home, but everyone uses it,” he says. “So it’s really a portfolio that accumulates wealth. And this portfolio is suitable for the whole family. There’s another family I’m working with and they’re all excited because one of the kids has a new house they’re building. And it’s very close to where dad and mom live. So it’s like, “Oh, Dad’s coming over and using the pool!”
Agents also point out that some families are patiently buying land around their main property until they can build their own estates, with some homes occupied by the younger generation.
For many super-rich parents, teaching their children smart real estate investing is a way to teach them wealth management. “There’s a difference between buying your child a house and giving them the keys and putting them on a project and giving them first-hand experience,” Flagg said, adding that some houses are always worth more than others.
“There will be some investments that are better than others because of the learning process,” Flagg continues. “I have sold houses to friends of mine over the years who started with one house in their early 20s and are now on their third house in their mid-30s.”
Brandon Thomas Lee and Dylan Jagger Lee — the sons of Tommy Lee and Pamela Anderson — received the memo. Last year, the pair sold a five-bedroom home in Malibu 3 million dollarsand received $1 million more than what was paid for the property in 2018.
Recent L.A. homebuyers include billionaire Len Blavatnik’s son Val, who bought a nearly $5 million home above the Sunset Strip in May, and Rob Lowe’s son (and Unstable Co-star) John Owen Lowe, who acquired a $3.4 million spread from Sherman Oaks in February.
Many children also follow their well-known real estate agent parents into the family business, like Farrah Aldjufrie and Alexia Umansky, who are part of family patriarch Mauricio Umansky’s team at The Agency and star with him on Netflix’s real estate reality series “Buying Beverly Hills.” .
So remember the rich kids of Los Angeles: Instead of that graduation trip to Europe, maybe talk to your parents about the investment benefits of a not-so-humble starter home in the Hollywood Hills.
“If you are currently in a position to purchase a home, townhouse or condo,” says agent Ron Smith of Smith & Berg Partners at Compass, “this will be far more meaningful and impactful to your future than giving you an inheritance to leave behind if they…” “I’m in my fifties or sixties.”
This story first appeared in the September 6 issue of The Hollywood Reporter magazine. Click here to login.