After a huge slump during the height of the coronavirus pandemic, the housing market has been experiencing a revival in recent months. In the second quarter of 2021, Mansion Global reports that luxury home sales in New York doubled from the year before.
Many investors dream of owning a mansion that comes with all the bells and whistles. However, many people cannot answer the question ‘What is a mansion?’ A distinction needs to be made between a big house vs mansion.
So, what defines a mansion? Is it just a question of size? And is investing in luxury real estate a good idea? These are some of the questions that will be answered in this article.
What Is Considered a Mansion?
What makes a house a mansion? Every investor must understand the definition of luxury property according to today’s standards. How big is a mansion? The consensus among real estate experts is that a house should have at least 8,000 square feet to earn the title of a mansion.
Here are some of the most famous historical mansions in the US:
- Hearst Castle, California (68,500 sq. feet)
- Russian Bishop’s House, Alaska (21,500 sq. feet)
- Shorter Mansion, Alabama (8,700 sq. feet)
- Winterthur, Delaware (96,582 sq. feet)
- Clark House, Idaho (15,000 sq. feet)
- Brucemore, Iowa (15,000 sq. feet)
- Hay House, Georgia (18,000 sq. feet)
However, square footage alone does not make a mansion house. So, what is considered a mansion? Here are some of the distinguishing features of these luxury real estate assets:
- High-quality building materials: Mansions are constructed using premium materials like superior stonework, high-grade wood, ornate granite mantelpieces, and marble countertops. In addition, most mansions use sustainable materials and are fitted with energy-efficient and smart technologies
- Exquisite architectural design: Mansions are characterized by one style or an intricate combination of Victorian-style, classical-style, or colonial-style. Mansion architecture also oozes a sense of grandeur with a beautiful façade, large windows, and tall ceilings
- Exclusive amenities: Older mansions had amenities like a lounge, billiard room, ballroom, and live-in quarters for staff. More recent mansions can include spa facilities, theater rooms, gourmet kitchens, temperature-controlled wine cellars, and more. Outdoors, you are likely to find well-manicured gardens, tennis courts, water features, a putting green, and an extensive garage
- Location: Mansions are usually located near highly sought-after addresses like Los Angeles’ Hollywood and New York City’s Park Avenue. Luxury homes are also located close to the hottest go-to destinations such as fine dining restaurants, museums, and shopping districts. In addition, mansions often offer panoramic views of beautiful landscapes like mountainsides, rivers, oceans, and lakes
Benefits of Investing in a Luxury Property
Now that you know what is considered a mansion, let us examine the pros and cons before you rush out to buy the largest, fanciest home in the neighborhood. Here are some of the advantages of buying a mansion:
- Lucrative rental opportunities: As mentioned earlier, mansions are located in picturesque settings and equipped with exclusive amenities. If you own luxury property in areas frequented by tourists, there will be many people willing to rent your property
- Tax deductions: When you buy a mansion, you can benefit from the tax deductions available for property owners. Common deductions available for landlords include interest, depreciation, repairs, pass-through deduction, travel, home office, property management, insurance, and legal services
- Real estate appreciation: The value of real estate investments usually appreciates over time. This means higher equity for owners of luxury homes
- Inflation hedge: Owning real estate is one of the best ways of keeping up with inflation. As the cost of living spikes, the value of your luxury homes will also increase. Landlords can justifiably raise rents whenever inflation goes up
- High resale value: Since luxury homes have high-end features and are close to important places, they usually have a better return on investment compared to other types of real estate. While prices are affected greatly by conditions of the home itself and the market, mansions are often on an upward trend
Cons of Investing in a Luxury Property
The following are some of the downsides of owning what is considered a mansion:
- Unpredictable loss of value: Just like any other type of real estate, mansions are not exempt from the volatility of the housing market. During a market crash, luxury homes can lose their value significantly
- High cost of ownership: Maintaining a mansion can be very costly. Repair costs, exterior upkeep, interior cleaning, HOA fees, and property taxes can end up costing thousands of dollars every year
Guidelines for Buying a Mansion
Here are some important tips which will come in handy when investing in luxury real estate:
Use the Right Tools
To find profitable investment properties, you need to use the right tools. One of the best property search tools out there is Mashvisor’s Property Finder. With this tool, you will find top-performing properties in your area of interest that fit your investment goals. The Property Finder uses the most recent AI technologies and machine-learning algorithms to generate a list of investment properties guaranteed to yield profits.
You can search for rental properties using metrics such as listing price, cap rate, cash on cash return, occupancy rate, and rental income. Looking for properties in multiple cities? Property Finder allows you to select up to five cities you are interested in.
Work With a Real Estate Agent
Unless you have a solid background in real estate, you would be better off hiring the services of a real estate agent. A local agent with experience in the luxury home market will help you find the investment properties that fit your priorities. They have been in the business long enough to navigate the market and find the best listings for you. In addition, a real estate agent will keep you updated on the latest real estate trends.
Take Your Time
Buying luxury homes is not something that you should rush into. Be patient as you consider everything before making a purchase of what is considered a mansion. Factors to consider include your budget, the location of the property, and any specific preferences you might have. You should also take time to look at other similar homes in the market and comparing them to see which ones best align with your priorities.
Select Financing Options Carefully
This is a major factor to consider when it comes to buying luxury properties. The process of purchasing a mansion is useless if you don’t have money to make such an investment.
First, check if you have enough money to make a down payment. If you choose to take a mortgage, will you have enough earnings to go through with it? Though a loan can be helpful, it can also be detrimental in the future if you are not prepared. Other things to look at are your debt-to-income ratio and credit score. These will determine whether or not you can be prequalified for a loan.
There will always be people willing to pay for luxury and comfort. Therefore, owning a mansion can be a very lucrative investment. However, before jumping in, take time to consider the pros and cons of such a move. In addition, be sure to follow the guidelines outlined above to enhance your chances of success.
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