The Biltmore: The Vanderbilt Fortune & America's Largest Mansion

0:00In 1885, the richest man in America died, William Henry Vanderbilt. He left about$200 million. dollars his two oldest sons got about 65 million each and his youngest son george got about 10. and george the kid with the smallest check went out and built the biggest house in america the biltmore 250 rooms about four acres of floor space on a piece of land in north carolina almost three times the size of washington dc and it's still the biggest privately owned house in the country to this day. 29 years after he bought it, George died. And the New York papers said he left$50 million. A historian went through the real numbers and put his personal estate at about$900 ,000.

0:42And$11 ,000 of that was in stocks and bonds. Only$11 ,000 from the richest family in America. His widow ended up selling most of the land to the federal government for about$5 an acre. But this is where it gets really strange. Today, that same house pulls in over a million visitors a year and it employs a couple thousand people, and George's family still owns it. So this is the story of the Biltmore. What it costs to build, what it costs to keep, and how a house that ate a Vanderbilt fortune turned into the one thing the family still has generations later. If you've ever walked through a house and thought, I could probably afford this, this one's for you.

1:19Quick note before we go back to 1888. Money Wise comes from a community called Hampton. It's a private group of founders and CEOs doing on average$25 million a year. And a lot of our guests come out of Hampton, which is why they tell us what their house costs and how much money they have and where their money goes every month. I'm going to pull a couple of those in as we go because the Biltmore problem didn't die in 1914. Some of our guests actually are living a small version of the Biltmore fortune right now. And so that's what we're going to talk about in this episode. If Hampton sounds like a community that you want to be a part of, go check it out at joinhampton.com.

1:51Okay, so first, the Biltmore, we gotta start with the money. You need to understand how big this fortune was. George's grandfather was Cornelius Vanderbilt, which is a sick name. I wish my name was Cornelius. Maybe I'll change it. He did stuff like the Commodore and steamboats and then railroads. And when he died in 1877, the New York Times put his estate at about$105 million, which by today's standards is about$3.5 billion. And almost all of it went to one son, William Henry. William Henry roughly doubled it in eight years. So 200 million by 1885. People called him the richest man in the world.

2:27And just as a comparison, $200 million in 1885 is roughly six to$7 billion today. George was the youngest of eight kids and he was nothing like his brothers. Cornelius II ran the railroads. William K. married Alva, who we'll get to, and George read books. He ended up with about 23 ,000 books. He was a quiet guy, single, in his 20s. In 1888, he visited Asheville, North Carolina, and he falls in love with the mountains. So he starts to buy land. But he wanted to use an agent so locals in Asheville didn't really understand who he was or know that this massively wealthy person started buying property.

3:06Because obviously, people start to ask questions if billionaires go start buying hundreds of acres of land. And so through this agent, he buys about 700 separate parcels of land, more than 50 farms, at least five cemeteries. and he buys a whole town called Best and renames it Biltmore Village. By the time he's done, he owned 125 ,000 acres. That's about 195 square miles. As a comparison, Washington, D.C. is only 68. And remember, this is the brother who only got$10 million. Each of his brothers had six or seven times that. By that standard, the poorest Vanderbilt son. But he was about to outbuild every one of them.

3:43So what he does is he hires the two biggest names in American design at the time, Richard Morris Hunt for the house, and Frederick Law Olmsted for the land. Hunt was basically the family architect at that point, and Olmsted is the guy who did Central Park. George and Hunt go to France and tour really old, awesome castles and houses and homes, and come home with a plan for a French Renaissance castle in the middle of the Blue Ridge Mountains. So they started construction in 1889, and one of the first problems they faced was that literally nothing was out there. There was no road that could take the weight or factory or anything, any item, to start actually building on the property.

4:19So George builds the supply chain himself. He lays a private railroad, which was three miles of track from the village depot straight to the job site. He puts a brick kiln on the property that turns out up to 32 ,000 bricks a day, and he builds an entire woodworking factory for oak and walnut wood. Later, limestone would come in by train from Indiana, and then he would bring marble all the way from Italy. He had about a thousand men working on this project, and around 60 of them were stonemasons. They would work 10 hours a day, six days a week, for six whole years. And at one point, the workers pushed for half pay if they got hurt in the job, and they got it.

4:55And in 1895, what they were building was like a spaceship. George was friends with Thomas Edison, so the house had electricity from day one. And when almost nobody's house did, it also had an Otis elevator. It had forced air heat. It had fire alarms, a call bell system so you could ring for staff from any room. In the downstairs of the home, there's a heated indoor pool that holds 70 ,000 gallons plus a bowling alley and a gym. This was so much more than a home. No one in the entire world had ever built something like this. It had 35 bedrooms, 43 bathrooms, 65 fireplaces, a banquet hall with a 70-foot ceiling, and he opened it on Christmas Eve in 1895.

5:38By that time, he was 33 and he wasn't married yet. There were 250 total rooms and he was a single dude. This guy had the most massive ambition of a home builder in the modern times today and especially back then. So we've had some really wealthy people on the show to talk about the homes that they've built and even one guy that built a massive mansion. But what the Biltmore costs makes every single house we've discussed in this show look tiny. Nobody knows exactly what the total cost of the Biltmore was because George never actually told the public how much everything cost. But a guy, Russell Lines, wrote about the Vanderbilt houses for American Heritage, and he said the accounts vary by several millions of dollars.

6:17Estimates run from$3 to$5 million, which, again, was way back in the 1800s. One article in 1895 said$6 million. A lot of people agreed that it was around$5 million. And if we run that through inflation today, you get somewhere around$200 million. Which, funny enough, actually sounds a little bit cheap for the biggest house in America. Like, there are spec houses in Los Angeles listed for more than that right now on Zillow. But inflation isn't the right way to think about this. In 1895, the entire U.S. economy was about$16 billion a year. Five million is about three hundredths of a percent of that.

6:51So take the same slice of today's economy and you're at something like$9 billion. dollars. I personally think that's a much better picture of how grand this build was. It was not a nice house. It was a nine billion dollar project that one guy decided to go out and figure out how to do. And then again, put it next to what he had, which was 10 million. The house alone took somewhere between a third and a half of it. That's before the land, before the furniture. And he shipped thousands of pieces all the way from Europe. What's even crazier is that by his family's standards, this wasn't even a huge deal.

7:24His brother Cornelius built the Breakers in Newport, and the press put that anywhere from$7 to$12 million at the time. So his brother William built Marble House for Alva. The paper said$11 million, seven of it spent just on marble. And those were summer houses, and they were only there for a few weeks out of the year. So even though George built the biggest house in all of America at the time, he didn't even outspend his brothers. I ask every guessed on this show what their net worth is. Most of them have to think about it. And it's not because they're hiding something. It's because their money is in dozens of different places.

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9:16He spent the same kind of money with about a sixth of the bank account. What I thought was so insane about the cost of this project was that the actual build of the house was the cheapest part. Running the house and the stables took about 80 servants. And then actually maintaining the land is an insane project in itself. George, early on, wanted the estate to pay for itself. He had farms, dairy, hogs, poultry, timber, all sorts of stuff that would actually make the land function as commerce. Later, he hired a guy named Gifford Pinkott to run the forest, the guy who went on to run the U.S. Forest Service.

9:53Then a German forester named Carl Schneck, who in 1898 started the first forestry school in America, right there on the property. So George's lineup were just stacked people, which was great for the country, but also wildly expensive. The Secretary of Agriculture at the time, Jay Sterling Morton, said George was quote, spending more money than Congress appropriates for this department. So one guy, George Vanderbilt, was outspending an entire federal department. And by the way, the pay for itself part never actually happened. The farms made some money, but nowhere near enough to justify how much it costs to produce the land and build this house.

10:28Historians who've gone through it say George was spending more than his income every year and dipping into the principal just to cover it. And when the economy turned in 1902, the family closed up the house and went to Europe. By 1908, the forestry school was a money pit. And so we started cutting costs and looking for land to sell. This is the part of home building that a lot of the Money Wise guests we've had on talk about when they talk about their own homes. We had a guy in the show who goes by Hank, which is not his real name. He was an anonymous guest. And he was describing a 24 ,000 square foot house.

10:56He described a move in day by saying we looked at each other like, what did we just do? Repairs alone he said maybe 50 to 60 thousand dollars a year you'd have to patch a pool five thousand dollars out the door you'd have to fix something that goes out ten thousand dollars you got to have staff his episode added it up to around ten thousand dollars a month just in miscellaneous fees and hank's fine hank can afford it but nobody asks how much that number is on the tour at vanderbilt or at the biltmore which i've actually gone on several times it's an amazing house and i highly recommend it george vanderbilt had the same problem with 80 servants and 125 000 acres attached.

11:31I literally can't even imagine how to deal with that as I'm sitting here thinking about it recording this episode. So eventually George does get married in 1898 to a woman named Edith. In 1912 the two of them were booked on the Titanic which is crazy and they actually ended up switching ships at the last minute. Edith wrote a year later for no reason whatsoever we decided to sail on the Olympic. Then two years later March of 1914 George had an emergency appendectomy and about 10 days later, he died of a blood clot at 51 years old. The New York Times guessed that his estate was probably about$50 million, but a historian named Edwin Hoyt later called those reckless newspaper estimates.

12:08His count was about$900 ,000 in personal estate, which is not accounting for real estate or a$5 million trust that George's father had set up. The trust ended up going to their daughter Cornelia, who was 13 at the time. Edith got$250 ,000, the income off of a$1 million dollar trust and the job of keeping the Biltmore alive. So what does she do? She starts selling. About 86 ,000 acres go to the U.S. Forest Service at around$5 an acre and$433 ,000 total, which was way under market. That land is the heart of what is now Pisgah National Forest today. But then, unfortunately, there was a huge flood in 1916 which wiped out the estate's plant nursery.

12:45So she sells the woodworking business in 1917 and then she sells Biltmore Village in 1921. So the The 125 ,000 acres they originally had gets whittled down to about 8 ,000 total. From the outside looking in, it looks like the Vanderbilts lost the Biltmore, but in practice, what she was doing was selling off pieces of the Biltmore to keep the house. This is the conversation I wish George could have had. In Hampton, when somebody's about to buy a big house, the first questions from the other founders aren't about bedrooms. They're, what does it cost to run and what happens to it in a bad year? Nobody asked George that because everyone around him was a Vanderbilt.

13:23So it's pretty crazy that the house is still standing to this day. By the time the Great Depression comes around, Cornelia's grown up and married to an English man named John Cecil. The city of Asheville comes to them and asks them to open the house to the public and bring tourists in. And by this point, the family actually needs the money. So in March, 1930, they opened the doors to the public. An admission was$2. Cornelia called it a, quote, fitting memorial to my father, which is a nice way of saying dad's house needs something to do now that he's gone. Then there was World War II and the government shows up with a weird request.

13:55The National Gallery of Art was nervous about Washington getting bombed. So in 1942, they put 62 paintings and 17 sculptures on a train to Asheville to hide them in the Biltmore. And then there's another unexpected turn in 1960. Cornelia's son, William Cecil, quits a banking career in New York and comes home to run the place with his brother. And he runs it just like a business. The house has to pay for itself, no government money, and in 1960, he got about 64 ,000 visitors a year. By the time he handed it to his son in 1999, it was over 800 ,000. He planted grapes below the house in 1971, trusted the old dairy barn and the winery and opens it in 1985.

14:36Then there's hotels and restaurants and Christmas events. And today it has around 1.4 million annual visitors, a couple thousand employees, and an adult ticket runs around$80 to$90, up from$2 originally. And it's somehow still private. George's great-grandson, Bill Cecil Jr., has run it since 1995. They pay property taxes just like everyone else. The county assesses the house at about$157 million. So the Biltmore house that drained the money is the thing still making a ton of money. And when you look at the history, it took about two generations of selling it off and then two more generations of putting it back together.

15:15So from a financial perspective, was George an idiot? Or did he do something really smart with his investment? I actually think the case against him is kind of easy. He built a house his fortune couldn't carry, and a lot of the rest of the family didn't really do anything differently. Not at first. On our episode of Money Wise about kids born into money, Taylor brought up the old line called shirt sleeves to shirt sleeves in three generations. His take was that the money isn't really the first thing to go. Generation one creates value. Then Generation 2 stops creating and starts managing. He calls it value stewardship.

15:46And then finally, Generation 3 grows up watching managers and turns into what he calls default value consumers. The Vanderbilts are the textbook case of this. Arthur Vanderbilt, a descendant who wrote the book in the family's fall, says when the family got together for a big reunion in 1973, there wasn't a single millionaire in the room. But there's another side. Almost every one of those giant Vanderbilt mansions on Fifth Avenue got torn down. The Biltmore is the one still in the family and still making money. But that's not necessarily because George was smart with it, because in many ways he wasn't.

16:16It's because his grandson stopped treating it like a house and made it a business. In Taylor's model, the third generation is supposed to be the one that blows it. But here, the grandson is the one who actually went back to creating something. He showed up as a business operator. So I think there's a big lesson here for anyone with real money. The house isn't the mistake. The house that only costs money is the mistake. George bought the most expensive thing in America and never really found a way to make it pay for itself while he was still alive. So if you own a house or you're about to build one, do this tonight, three numbers.

16:47First, forget the price. What does it actually cost to own this house for a year? Taxes, insurance, utilities, staff, pool guy, repairs, add all that up. The purchase price of the house is just one component, but the actual annual spend and cost of upkeeping that house, that is the real number that you need to be focused on. Second, divide that by what your money earns without you. So look at investment, income, rent from properties, whatever comes in if you stopped working tomorrow. If that alone covers the house, great. But if the only thing paying for the house is you continuing to work or even going back to work, then the house ends up being your boss.

17:21George's investments could not carry the billboard. Third, what percent of your net worth is the house? George was somewhere around half. If you're anywhere even close to that, I think long and hard before actually buying the house or property you're looking at. And if you happen to have kids, one more thing. We've had a number of guests on the show from Hank to Neil Patel and both optimize downsizing. Hank from about 24 ,000 square feet and Neil from about 10 ,800 to 3 ,000. Both said something similar. They like seeing their kids more. In a smaller house, you actually bump into each other. If you have tens of thousands of square feet in your house, the odds of you bumping into your kid get a lot smaller.

17:59If you ever happen to be in Asheville, North Carolina, I highly recommend going to check out the Biltmore. I've been there a number of times and I love it. It's an amazing treat and it's something that we love going back to around Christmas time as well. And when you walk out through the gift shop, remember that that gift shop is what saved the entire place. Lastly, if you're a founder doing seven figures or more and you want people around you who will ask what the house costs to run before you go buy it, that is Hampton. Well, that's one part of Hampton. Hampton asks a lot of things about family and kids and how to run a business and how to hire and fire and how to scale.

18:28And I think if that sounds like you should be in that room, then you probably should. It's probably just right for you. Go check out joinhampton.com. And if you made it this far, subscribe. And I'll see you next week. I'm Daniel Burke, your host. Thanks for watching Money Wise.