Why Is Now the Best Time?
So what’s changed recently in luxury real estate market trends? What exactly has made these properties a bit more affordable for the average investor? Well, to put it simply, an increase in inventory has led to stalled luxury home prices. With inventory on the rise, and prices slashed, the luxury real estate market is cooling down to a buyer’s market. This is opening up the gate to real estate investors who never thought they could buy luxury investment property. Let’s see exactly what’s going on with the US real estate market 2019 that’s leading to this cool-down.
Related: Is It a Buyer’s Market or Seller’s Market?
The Impact of Increased Inventory
Some of the hottest markets for high-end property have recently been experiencing lower home prices than usual because of the rise in inventory. It’s the basic idea of supply and demand. As buyers are already few and far in between for luxury homes, giving them more options leaves these properties on the market longer. As a result, investors can find great real estate deals on below market value luxury properties as sellers lower prices to lure them in.
However, this doesn’t mean all luxury real estate markets are experiencing the same trends. Real estate investors know that there are many differences on the local level of each market. For example, the luxury real estate markets in Maui, Northern California, Colorado, Sarasota, and Florida are all experiencing a substantial increase in home prices. Whereas, other markets like many parts of New York and New Jersey are in a slowdown.
To start searching for investment properties in the luxury real estate market, click here. You can find the best investment properties with Mashvisor!
Why Is There a Luxury Real Estate Market Slowdown?
So why are certain areas/cities across the country experiencing this slowdown in sales and increase in inventory?
- High Property Tax
It seems that cities with high property taxes are the same ones experiencing a slowdown in their luxury real estate market. Cities falling into this category are Boston, Chicago, Austin, and New York City. Federal tax changes limiting property tax deductions could be a reason explaining the decreased sales.
- Foreign Buyers
It’s important to note the magnitude of influence foreign investors have on the country’s luxury real estate market. According to the National Association of Realtors (NAR), there was a 21 percent drop in general foreign real estate purchases between 2017 and 2018. To get a better idea of what this means for the US real estate market, it’s a $32 billion drop in sales. That’s the largest decline on record. Foreign buyers actually made up about 8% of the buyers of existing homes. This decrease in foreign interest of US housing could be caused by political uncertainty in the US.
Why You Should Invest in the Luxury Real Estate Market
When we say market ‘slowdown’, it isn’t necessarily a bad thing. What it means is that the luxury real estate market is finally going to find its balance again in 2019. It’s been a hot market for years and will continue to realize strong buyer demand in many parts of the country. All in all, here’s a summary of why you should be buying an investment property in the luxury real estate market now:
It’s Smart
If you’ve invested in other types of residential real estate (vacation rentals, single-family homes, etc.), you already know how smart real estate investment is. Real estate investment is a great way to build wealth. And if you want to realize some serious cash flow, investing in the luxury real estate market is the way to go. Yes, it comes with higher costs, but right now you can find luxury property for less. And the risk of high costs is combated with high returns.
Growth Will Continue
Like we said, growth is expected to be maintained in the luxury real estate market. Yes, foreign investors have pulled out, but the result of that (lower prices) has motivated many investors to choose luxury real estate as an investment. So while prices may have dropped right now, the market will soon balance out again with this new demand.
Related: US Housing Market Predictions: What’s to Come in 2019
So now that you know what’s led to this great opportunity to enter the luxury real estate market, all that’s left to do is invest. But how does one even begin the process of buying a luxury home for investment?
How to Start Investing in the Luxury Real Estate Market
Here are some tips to get you started in the luxury housing market.
Determining Your Investment Goals
It’s important to first identify what your objective is with investing in the luxury real estate market. Are you looking for a quick profit? Or do you want a long-term cash flow investment? When deciding on which type of luxury property to go for, it helps to think about what you actually want to get out of your investment.
For example, you’re likely looking for an investment that will generate rental income on a consistent basis. Simply invest in luxury multi-family rentals in more expensive parts of the city of your choice. Or you might want to look for markets with high-end short term rentals in busy cities for higher rental income.
Related: Breaking Into the Luxury Investment Properties Niche
Deciding How to Finance a Luxury Investment
If you don’t have the capital required to invest in luxury properties, you might need to take out a loan. If you have a good strategy set up for flipping luxury homes, you can get approved for something called a hard money loan. This type of loan is usually more easily granted than traditional bank loans. This is because they’re basically short-term loans which are designed to be paid back in just a few months.
The financial aspect of real estate investing could get quite complicated if you don’t use the right resources. If you want to enter the luxury real estate market as smoothly as possible, check out Mashvisor’s tools. Our rental property calculator includes a filter for financing methods so that you can see what kind of ROI to expect based on mortgage/cash modifications.
Finding the Best Luxury Homes for Investment
If financing isn’t the problem, but you’re searching for high performing areas, you can use our heatmap analysis. Set your criteria (high cash on cash return, low vacancy rates, etc.) and it’ll narrow down exactly where you should be investing in luxury property.
To start looking for and analyzing the best luxury real estate investments in your city and neighborhood of choice, click here.
Related: Expert’s Guide on Finding Income Properties Using a Heatmap