According to Realtor.com, the sales of luxury properties in June 2018 witnessed an increase of 25% compared to June 2017.
This is big news for both real estate investors and homebuyers! The demand for luxury properties is increasing along with investing in them. To be precise, this can be attributed to high-paying jobs and the need to climb the real estate ladder for such professionals. It is no longer satisfying for them to buy regular homes. Such homebuyers are taking pride in owning such luxury properties.
What groups an investment property with luxury properties?
Firstly, luxury properties can be defined as a property that’s valued at $1 million or more. Such properties are popular in cities and metropolitan areas. On the other hand, with New York City real estate, a property is considered among luxury properties if the price hits $4 million.
According to Mansion Global, “Luxury properties are becoming more and more exclusive. The prices for such properties are increasing along with the demand.”
The luxury properties market is picking up at a high pace. For many cities in the US real estate market, the constant job growth and stability, both political and economic, are among the main reasons for this phenomenon. Of course, New York City is witnessing an extra few points of growth in the sales of luxury homes due to the foreign interest and investments in the city.
Real estate experts consider this rise in demand for luxury properties to be a healthy side effect of real estate growth. Such supply and demand only create more and more buyers and sellers for luxury properties. Additionally, real estate experts state that the less there is space to expand in a city, the more luxury properties will be contracted, and their sales will skyrocket.
If you’re looking for luxury properties as a buy-and-hold, read this blog post: The 5 Most In-Demand Cities for Renters.
According to the latest rise in sales, many real estate investors have begun capitalizing on investing in luxury properties. As real estate investment properties, they can be used as long-term rental properties or short-term vacation rentals. Moreover, real estate investors must be aware of the subjectivity of the name luxury. While it may seem luxurious for you to have a brand-new kitchen or a certain number of square footage, others won’t consider anything less than $10 million a luxury property.
What should a real estate investor look for in a luxury property?
Of course, even the experienced real estate investor can make the wrong decisions when it comes to luxury real estate. You must be aware of what luxury property buyers are looking for and how you can give them access to those needs. Here are a few things to keep in mind when buying luxury properties:
A high price doesn’t translate to luxury
This can be applied to cities like Chicago, New York, San Francisco, and Los Angeles. In such areas, you are going to pay a steep price to get a property that would be normal in another location. After all, a luxury property has to imply luxury. Buying a two-bedroom apartment in NYC might seem luxurious all thanks given to the price. However, a luxury investment property needs large space and special features.
Look for out of the ordinary features
The features of luxury properties can range from anything technological to living on the same street as a celebrity. Quite often, luxury property buyers are looking for a quiet, private space. Moreover, many property buyers and real estate investors are looking for features that almost nobody has. This has its way of turning the price all the way up.
Consider using an investment property calculator
An investment property calculator is a must. The more luxurious a property, the higher the investment needed in it. Whether you’re a real estate investor or a home buyer, you’ll find an investment property calculator of great use. Through an investment property calculator, you can conduct a full-on real estate market analysis to know the current market value of the property along with accurate future forecasts of what it can be. To give it a go, try using Mashvisor’s investment property calculator by clicking here and enjoy the 14-day free trial.
Consider property taxes
Make sure to factor property taxes in with your purchase decision. With luxury properties comes the large square footage. Of course, you can manage when renting the property and cover the costs through the rental income generated by it. That translates into a large tax bill. Of course, with every city and state, there are different regulations. Make sure to be well-informed and don’t hesitate to consult a tax attorney.
Don’t underestimate utility costs of a luxury property
This is one of the reasons that luxury homes are called so! Having to pay utilities for a luxury home can break the bank for anyone who is not financially ready to do so. Real estate investors and homebuyers must be well aware that the bigger the space, the bigger it is to maintain it, heat it, and cool it.
On a side note, luxury properties will need maintenance as well. Expect to spend a bundle if anything needs repairs.
Location remains of major importance
Location is among the biggest reasons of why luxury properties are luxuriously expensive. If you wish to have a townhouse in Manhattan, you’re going to pay the price for it. The location of luxury properties must be calculated by the buyer. A useful tool to use is the heatmap analysis by Mashvisor’s investment property calculator. For more information on how a heatmap analysis can help you locate the best investment property, read this blog post: How to Find the Best Investment Property Using a Heatmap.
Buying a luxury property and converting it into a high-end vacation home rental is becoming a common practice among successful real estate investors. As real estate investors are finding new methods for making money in real estate, luxury properties are increasingly becoming more feasible as a real estate investment. Lastly, start real estate investing, whether in luxury properties or others, property prices are only getting higher!
If you have any more insights on investing in luxury properties, please share them with us in the comments section.