Real estate has been considered a safe investment for many years now, regardless of whether you flip, rent, or own. However, if you’ve got the money, expanding your portfolio into the luxury real estate market is an even more lucrative investment.
Tap into the luxury real estate market, and it could be a very profitable experience, especially if you’re prepared to make yourself aware of market trends and know when to make your move.
To learn how to get started in luxury real estate investing, check out our video below:
In this post, we will explore what it’s like to work with beautiful houses, luxury apartments, and mansions for sale. If you’re interested in breaking into the luxury real estate market, we’ve included a step-by-step guide on how to get into luxury real estate as a beginner investor.
What is Luxury Real Estate
Real estate isn’t labeled luxury just because it’s got a high price tag. It also has to be exclusive and unique in a desirable way.
So what would a high-end buyer or renter be looking for? Location is key. Luxury activities such as high-end dining, shopping, and the arts should be easily accessible. Proximity to other luxury houses is also crucial.
Luxury real estate should also have opulent features, unique designs, high-end amenities and promote an exclusive experience.
The luxury real estate market comprises a wide range of properties, from luxury apartments to fully-furnished mansions.
The Pros and Cons of Luxury Real Estate for Beginner Investors
If you’re wondering whether investing in luxury properties is worth it, here are the pros and cons.
Pros of Luxury Investment Properties
A luxury property will have high-quality furniture, facilities, and amenities. This means tenants will happily pay extra money to rent out this type of property. But, of course, how much rental income you can expect depends on what you provide for the tenants.
Low-Risk Way to Invest
Luxury rental properties might look like a pricy way of stashing your cash, but it also happens to be one of the lowest risks. Stocks and shares are a very uncertain form of investment, but houses rarely lose value completely. On the contrary, they often double every ten years.
With a rental property, there are tax advantages you can take advantage of. For example, you can claim deductions on heating, hot water, repairs, non-refundable deposits, and the cleaning of communal areas.
Less Follow-Up Required
Short-term rental properties such as Airbnb require regular follow-up with guests before and during their stay. On the other hand, a luxury rental property requires less follow-up because tenants tend to stay for much longer, for example, one to several months.
With guests staying much longer, the risk of damages is significantly reduced. The benefit of less follow-up is that you’ll be saved from the hustle and bustle. It will also save you time and allow you to focus on growing your business and making money.
Type of Tenant
Dealing with tenants is not something most real estate investors look forward to. It can be exhausting and give landlords a headache, especially when the individual tenants come from different backgrounds. However, with luxury real estate rentals, you’ll be dealing with a specific type of tenant. They might be business travelers or people who can pay extra money.
Cons of Luxury Investment Properties
Luxury Houses for Sale Are Expensive
A luxury rental will produce higher rental income, but luxury houses for sale have a much higher price tag. If you’re renovating a property intending to sell it as a luxury property, providing high-quality, fully-furnished properties with all the essential services, facilities, and amenities will require significant investment.
It’s Not an Investment That Suits Everyone
A luxury rental property brings high rental income, but the occupancy rate is likely to be much lower than a standard property. So to attract people who are financially comfortable means you’ll have to put extra effort into advertising the property, finding the best platform, and deciding on a rental price that’s suitable for the market.
How to Get into Luxury Real Estate – A Step-by-Step Guide
So, you’ve decided you want to start your investment journey by going after high-end or luxury homes. But do you know how to get into the luxury real estate markets? Tapping into such a lucrative market can be challenging, but it is possible if you take note of the following steps.
1. Define Your Goals
Evaluate and prioritize your plans for the future. Think about your personal, professional, and financial goals, as these have a massive influence on how you start and build your luxury real estate business.
Ask yourself where you want to be in five, ten, and fifteen years from now. Then you can work on the steps you need to follow to get there. Goals have several purposes. For example, they help you stay focused and help you take action.
For goals to be effective they have to be SMART. In other words:
2. Do Your Research
As soon as you’ve defined your goals, you can move on to the next step, which is in-depth research.
Research home values and rental prices. Check neighborhood amenities. Don’t be afraid to look outside of your current location.
At this point, you should also consider whether a luxury investment property is the best way for you to invest in real estate. Investing in rental properties is an excellent way to secure income and long-term appreciation. However, there are a few things you should consider:
- Time commitment: Even if your hire a property manager, the property can be an active and time-consuming way to invest in real estate.
- Liquidity: Properties aren’t a liquid investment. When you want to sell, it could take months for you to receive fair market value.
- Capital requirement: A luxury property will require a significant amount of money. In most cases, you’ll need to put down a minimum of 20%, plus pay closing costs and have reserves in the bank.
- Unpredictability: The rental and housing market can be unpredictable. Your property might provide you with a high income, but it might not be as steady as you’d like.
3. Organize Your Finances
If you’re approaching a lender, you’ll need to provide information on your financial history. Before anyone asks you any questions, take a close look at your personal finances, so you don’t find yourself feeling embarrassed.
Request a copy of your credit report and review any existing accounts or investments you might have. Depending on your investment strategy, there will be a few financing options available to you. For example:
- Mortgage from a financial institution
- Government loan
- Private money lenders
- Business partnerships
4. Write a Business Strategy
Time to write a business plan that should include the resources and tools you plan to use. Mashvisor, for example, has a wide range of valuable tools that can help you analyze the market and find the right luxury real estate property for your needs.
5. Market Appropriately
If you want your real estate business to be successful, you also need a successful marketing strategy. A range of marketing materials are available, for example:
- Direct mail
- Email campaigns
- Social media
- Bandit signs
- Luxury rental platforms such as BoutiqueHomes, Villaway, Villas of Distinction, Dream Exotic Rentals, Airbnb Luxury
6. Stay on Top of Leads
One of the worst things you can do for your business is launching a marketing campaign and not tracking and following up on your leads. Even if there is not an immediate opportunity, cultivating a relationship with a potential client is priceless.
7. Build a Support Network
When you’re starting in real estate investment, don’t try to do it on your own. You’ll find many deals and leads in the future that will come from a personal network you develop. Your network might include colleagues, clients, competitors, or mentors.
Tips on How to Get into Luxury Real Estate
If you want to invest in luxury real estate, there are several paths you can take. Whether you buy for yourself, flip, or rent, here are some of your options:
- Buy a luxury condo
- Buy a high-end vacation rental
- Invest internationally
- Flip a mansion
- Complete a custom build
If you’re unsure where to start, here are some top tips for success.
Set a Budget
One of the most important things to consider before investing in your first luxury property is how much capital you’ve got available for your venture. Investors often think the property asking price is the final quotation and don’t take extras into account. When other expenses get piled on top, they’re left feeling completely overwhelmed.
If you’re not investing in a stand-alone property, you’ll need to consider maintenance charges and other additional service charges such as parking. Even if your budget has no limits, make sure that you’re not wasting any money you don’t have to. Keep a maximum budget in mind to cover all costs because your money is precious.
Location, Location, Location
Location is a crucial factor when it comes to the price of your luxury property. However, when you judge the value of a property’s location, you must do it objectively and subjectively.
When you make an objective judgment, you should be checking that the location offers all the local amenities a prospective tenant or buyer might need. For example, will they be able to enjoy a convenient lifestyle and excellent all-around quality of life? Does the property come with excellent transport links to major surrounding cities and the local area?
After looking at the location objectively, you can then decide whether the area is somewhere you feel drawn to on a more emotional level.
Amenities and Facilities
The criteria by which you judge a luxury property should remain the same whether you’re looking for a property to live in yourself or one to rent out later. A prospective tenant will likely be looking for the same standard of lifestyle that you’d want for yourself. Therefore, you should put yourself in their shoes and try to understand their needs.
Some of the amenities you might want to consider include a back garden, swimming pool, garage, and indoor smart appliances. However, access to community amenities is also essential.
If you’re hoping to attract families, the property should be near good schools and nurseries. Proximity to a selection of restaurants and shops is something else to consider. A local GP surgery and plenty of nearby leisure facilities are also things that will appeal to almost everyone.
Hiring a Real Estate Agent
You’re probably very tempted to jump right in and do everything yourself. Flying solo might be appealing, but as a beginner, you’ll benefit from the help of an experienced real estate agent. There are so many factors to deal with and things you hadn’t considered, but bringing in the professionals is vital, especially if you’re still learning the ropes.
With a trusted real estate agent as your ally, it’ll make all the difference when it comes to securing the right property for your real estate portfolio. Ideally, they should have years of experience in the local market, a long list of satisfied clientele, and a network that comprises tenants, property owners, and sellers.
The best real estate agent will look for properties on your behalf, present you with options that meet your criteria, negotiate with sellers, and research property backgrounds. A realtor is also essential if you want to get your property transaction verified by the proper governmental departments.
Real estate investment offers some incredible opportunities, especially when there are new developments in a desirable area. If you’re just starting, be prepared to take it easy, don’t rush it, and the right luxury property will come along.
Learn as much as you can about how to get into luxury real estate. Make sure you do your research thoroughly and make several visits to each property before you make a decision. If you slow things down, it might not be long before you’ve found yourself the perfect investment property.