5 Factors to Consider When Investing in Luxury Real Estate
After the pandemic slump, real estate is once again considered a hot commodity. There’s a particular interest in the luxury market as well, with CNBC.com reporting a record number of closings in high-end properties. In fact, NYC-based real estate broker Christopher Kromer notes that now might be the best time to buy as there is still loads of listings in the luxury property space. Sellers are giving buyers attractive discounts in areas like Manhattan and Brooklyn, giving investors plenty of options in prime real estate.
Luxury properties don’t exactly come cheap, and this is true whether you are buying a property in Portugal, in the United States, or Australia. So it is important for investors to do their due diligence before they sign on the dotted line. To help you find a property that can generate sizeable returns, here are some key factors to keep in mind:
1. The Type of Property
Contrary to popular belief, luxury homes are not just defined by their price tag. The size, exclusivity, materials, and amenities matter as well, and you can find luxury properties in cities and remote regions. In fact, our list of the ‘Different Types of Luxury Property’ covers exactly this — investors can choose to invest in a wide range of properties, from high rise apartments to historical homes.
It’s also important to consider the type you want to have in your portfolio, especially as they have different target markets. For instance, you might be able to rent out a rural mansion to a large family, but not to a bachelor, who is more likely to be attracted by a swanky apartment in an urban location. And if you decide to live in your investment, or use it as a seasonal home, you'll need to find a property that suits your own specific needs and wants.
2. What You’ll Use it For
On a similar note, you need to determine what you'll actually use the property for. Luxury real estate is a low-liquidity and high-value investment, and not being clear about why you’re buying a property can result in financial losses. It is best to consult with professionals, such as those at Pine Financial Group, to discuss real estate financing options, and what would benefit you in terms of maximizing cash flow.
This is why financial resource AskMoney.com discusses in its guides the importance of knowing your 'why' when acquiring a luxury property. Using the property yourself means you will essentially be paying the rent, but it gives you the benefit of self-utilization while the value appreciates. Meanwhile, leasing it will give you a regular income and long-term value appreciation. You can also flip it and profit from the resale, or hold onto the property while its intrinsic value appreciates.
3. Where It’s Located
Think long-term regarding how a property’s surroundings will change. For example, an empty lot near a high rise may result in the construction of another building that impedes your view. This may put off potential buyers or renters.
Another thing to consider is accessibility to luxury activities and amenities, such as high-end shopping and dining. A trophy address like Park Avenue also adds value to the property, as well as coming with fantastic, scenic views. A good way to weight up prospective surrounding area is to contact the town hall or public agencies in charge of urban planning.
4. The Amenities
Those interested in luxury properties look for amenities that are on a scale grander than what middle-income buyers want. While everyone requires a certain level of security and privacy, a high-end property may offer this to the point of seclusion. Additionally, BusinessInsider.com discusses that “well-being” amenities for luxury properties include outdoor yoga decks, tranquility gardens, and private spas. A luxury property should be able to give a person comfort in abundance; so smart home technology might be a worthy feature to consider.
5. Your Means of Maintaining the Property
Whether you’re leasing the property or using it yourself, you’ll need to have a plan on how to maintain it. For one, keep it looking brand new by outsourcing tasks to contractors for things such as deep cleaning. If you have a lawn, hire a lawn maintenance company every few weeks to take care of it. If you’re leasing the property, you may want to consider third-party property managers to help keep everything in check for you. After all, top-quality service is what people expect from a luxury property.
From deciding the type of property to considering if you have the means to maintain it — a lot of thought goes into the different factors that surround your investing in a luxury real estate. However, extensive planning and research will ensure that you’re investing wisely, and that your investment pays off.
If you want to read more about luxury living, check our resources here on ElevatedMagazines.com.