How to Invest in Luxury Real Estate
By: Waylan Smart
Many have seen the headlines: Well-known old homes selling for record prices. Luxury town homes appreciating in value even as other properties sit unsold. Reports that luxury properties in Midwestern states are attracting interest once reserved only for mansions on the coast. A prominent art-auction house investigating the possibility of marketing architectural landmarks as a new form of very expensive art.
Luxury real estate appears to be an appealing investment even in the economic climate of the moment. It is worth asking why this may be the case.
For one thing, the market for luxury homes benefits from a certain amount of what one might call “insulation.”
Economic troubles that may affect the willingness of buyers and sellers at every other level to, well, buy and sell, do not necessarily reach the ultra-wealthy. Also, foreign investment is a factor. Quality of life factors continue to make the US a desirable second home for wealthy foreign nationals, with the higher education system attracting people from all over the world. As a result, foreign real estate investment may help keep the market for luxury real estate in good standing. Finally, consider that wealthy people may tend to pay for important purchases in cash, which means that fluctuating interest rates and credit-market problems hold no power.
What do savvy luxury real estate buyers do? How do they make sure their investments in luxury real estate prosper? There’s never a simple formula, but experts suggest the following rules:
It’s important to know what “luxury” means on a personal level, and to know which type of real estate is personally appealing. Generally luxury homes are defined as those costing over a million dollars in the United States, but the word may also mean a certain kind of neighborhood, greater access to the Great Outdoors, or a room where all one’s fishing trophies can be displayed. Whether it is location, space, quality of furnishings, or any other factor, an educated buyer is often ready to rank their priorities.
Buyers may also take steps to ensure the real estate company they are working with knows these priorities as well. A contract may be used to ensure that luxury real estate buyers are getting what they want, top-to-bottom. For example, a buyer might specify in the contract specific language (”restaurant grade” kitchen fixtures, for example, or a library of however-many square feet, or with glassed-in shelves). On a related point, when touring a luxury development-where a “model home” is often used for tours for potential buyers, rather than the actual home to be bought-remember that the model home may not necessarily identical to the home that is purchased.
A real estate buyer will often coordinate pre-approval, to increase the speed and flexibility in buying properties. After all, these are the sort of properties that may require a buyer willing to “strike while the iron is hot.” Luxury real estate attracts people with a lot of money to spend, a secure financial situation that makes them attractive borrowers (if borrowing proves necessary), and it tends to be advertised nationally rather than locally, so a lot of people may be interested in any given property. (As stated above, too, the number of likely buyers doesn’t necessarily decrease when a market downturns-that’s part of why it’s luxury real estate.)
While knowing their priorities, today’s buyers often keep an open mind. After all, the list of states that offer great luxury properties is expanding-it’s no longer just about the two coasts. Buyers may know what is desired in a neighborhood, but they may also be prepared to find it in places where it wasn’t expected. Prices are appreciating, according to one expert, in over 2500 areas
Real Estate Investing, How to Reduce Your Risk With Market Research
Author: Sal Vannutini
To convert every property deal into a high capital gain, it is important for investors to understand and determine the correct value of their investment property. Without a sound understanding of the real estate market, it is impossible to evaluate the possible value of a property deal. As a result, you are likely to quote a wrong price when advertising your property for sale.
If the price quoted is much lower then the losses are heavy. On the other hand, if the price quoted is unreasonable, then you will not be able to attract any prospective buyers. It is not safe to hold a property for a very long time, as the real estate market is very volatile. Property that may once be regarded as an area of high appreciation may suddenly cease to appreciate. In order to minimize your risk in real estate investing, it is advisable to conduct some market research.
To judge the value of your property, it is crucial to make property comparisons. The market provides various tools to facilitate easy comparison for investors new to the real estate investing scenario.
It may be initially difficult to understand how external factors influence property values, but with considerable amount of experience, you will soon understand the rules of the game. After closing a few deals on your own, you will be able to refer to your own records to understand how each deal differed owing to market trends prevailing in that period.
However, if you are new to real estate industry, you will have to look around to obtain property details. Some of the places you may consider to get valuable information about real estate property values are the county clerk’s office, local real estate appraisers, and the local tax appraiser’s office.
All real estate professionals emphasize on the role of real estate agents to create a win-win situation. Agents are an inexhaustible source of information on property values.
For real estate investing, you should invest considerable amount of time and energy to conduct research about different renovated and un-renovated home values and land values in their area.
This research is vital to decide the ‘end value’ for a deal and also help you to bargain effectively in all your future dealings. For old properties, go around and see how other investors have remodeled the houses and incorporate these ideas in your project.
Most investors prefer to research these aspects on the Internet. However, this information can sometimes be misleading, and personally visiting properties also gives you the opportunity to interact with concerned people.
