Factors to Consider When Investing in High-End Real Estate

Have you been considering an investment in high-end real estate? There are many different investment strategies that could factor into your decision to purchase a high-end property. As opposed to the traditional market home, high-end real estate provides a unique opportunity to establish a trademark family gathering place, and the right real estate investment can be an asset for generations. Whether you’re interested in purchasing your second or third home, investing in a high-end property for rental purposes or simply learning more about the process, there are a lot of different ways to make the most of the market.

Questions to ask if you are thinking of investing in high-end real estate

There isn’t one specific investment strategy that leads buyers to purchase a high-end home. It could be a strategy to pass wealth down to the next generation, a source of rental income or a purchase in hopes of selling later at a higher price. If you’re thinking about investing in high-end real estate but not quite sure if you should take the plunge, these questions can bring clarity to the decision.

1. Is it a good time to invest?

With the rise of vacation rental services like Airbnb and HomeAway, it seems that renting out real estate is as easy to coordinate as ever. According to a study featured in Forbes, ten cities with a strong Airbnb presence caused “1.3 percent fewer hotel nights booked and a 1.5 percent loss in hotel revenue.” Translation? Research shows that people increasingly prefer to stay in a home instead of a hotel.

This has greater implications for the upper-tier real estate market, as it offers a way to monetize a summer vacation spot or second home. If upper-tier real estate was a good buy before, the rise in popularity and accessibility of home rentals has made the investment even more worth the buy.

2. What types of high-end real estate interest you?

When deciding whether investing in high-end real estate is for you, consider the different options available. Are you looking for a rustic home surrounded by nature? Does a historic home with the potential for renovation excite you? Perhaps an uber-modern property with one-of-a-kind views is more your style. If this is your first time investing, going for a smaller apartment or condo could be a good place to start. Here are some ideas of different types of real estate to invest in:

• High-end home
• Condo near a beach
• Apartment with spectacular views
• Warehouse/event space
• Luxury loft
• Lakehouse
• Ranch house with stables
• Gated community home
• Refurbished historic property
• Sleek, modern home
• Mansion with architectural nuances

The possibilities are endless, but deciding what kind of real estate you would like to invest in is an important step before beginning the buying process.

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3. Will you need financing?

Investing in any kind of real estate can require a loan depending on your financial situation. Because high-end real estate is more expensive than others, timing often comes into play when deciding whether or not to invest. Being able to pay in full for an investment upfront can make the investment lucrative on a shorter timeline while getting a loan from a bank or third party can make an otherwise impossible investment possible. Consider your financial situation before making a final decision on purchasing high-end real estate, as needing a loan is common but can complicate the transaction.

4. Who would live in the property?

When investing in real estate, it is reasonable to consider who would be living on the property. Ask yourself whether you would keep it in the family or rent it out before making the transaction complete to make things easier later on.

A lot of people have a difficult time letting go of a property for rental once they have invested in decor and put personal touches on it, so definitively deciding who would inhabit the property before investing is a good idea. If you’re considering renting out high-end real estate, outline the qualities you’re looking for when reaching out to renters.

Here are some qualities you might want to look for in a potential tenant.

• Respectful via email
• Responds quickly to email/voicemail
• Financial stability
• Currently employed
• Has positive references

5. What external factors are involved?

When deciding whether to invest in high-end real estate or not, it is a good idea to think about external factors that influence your investment. For example, if you’re purchasing real estate in a city that relies on tourism, consider the current state of tourism. If you are planning to purchase real estate in a coastal city, it’s crucial to factor in the history of natural disasters in that area. Additionally, the housing market and overall state of the economy are factors you should weigh when deciding to invest in upper-tier real estate or not. Generally speaking, a good time to invest is when the housing market is at a low, as the value of the property rises as the market inevitably peaks again.

6. Where is the property located?

The word “upper-tier” has a different meaning depending on geographic location. Within North America, different locations have their own definition based on the average income and real estate available at a given time. When deciding whether to invest in high-end real estate, consider the location and compare similar properties with the one you’re looking to buy.

First, determine whether or not the price is common for the area, as this is a practical gauge of whether you’re getting a reasonable price on the property or not. Additionally, you can get more for your money in different geographic regions, so consider whether square footage or prime location is more important to you. You could potentially get a much larger high-end property in the Midwest or the South than a coastal city.

Remember, investing in upper-tier real estate abroad can be an exciting venture, but often comes with foreign taxes and property laws. Be sure to research the area and talk to other homeowners who have bought property abroad before signing on to a foreign property.

Now that you have some factors to consider before making the leap to purchasing an investment, have fun with the process! High-end real estate is an exciting field with a variety of architectural options and financial flexibility.