Six Things Real Estate Investors Must Know Before Buying Luxury Real Estate

As you survey potential real estate investments, do luxury properties continually catch your eye? If so, now might be the ideal time to make that move. 

In the U.S., the luxury home rental market has seen impressive upticks in both average daily rates and lengths of stay. By December 2023, experts project the rate to hit around $850 per night, compared to just under $500 in January 2022. Likewise, renters are now staying around 12 nights on average, compared to approximately six nights during the earlier period. 

Knowing this, it can be tempting to enter this market at full speed. However, it’s important to do your research before jumping in. Today, we’re sharing six points to consider as you browse prospective luxury properties. By keeping these factors in mind, you can make sure the next investment you make is a sound one.  

1. Property Type 

First, think about the type of luxury real estate property you want to buy. Are you interested in purchasing a single-family home you can renovate and enhance, ultimately flipping it into a premium listing? Or, are you looking for an upscale apartment or condo building that multiple families can use? What about a vacation home that tenants can lease on a weekend, short-term, or long-term basis? 

There isn’t a right or wrong answer, but you do need to be clear on what your investment goals look like. When you’re certain of this vision, it helps direct the entire trajectory of your real estate search. 

For example, if you want to own a luxury vacation rental, you’ll need to think not only about the property itself, but the surrounding areas that could attract (or discourage) prospective tourists. In this case, an amenity-rich condo in a popular city may prove to be more valuable and profitable than a single-family home in the suburbs. 

However, flip-and-sell investors might be less interested in nearby attractions and more curious about how well the property itself is made, prioritizing sophisticated touches that luxury buyers prefer, from first-rate appliances and well-appointed outdoor living spaces to home automation and wellness amenities, like spas and gyms. 

2. Property Location

In real estate investing, location is always important. Yet, it becomes even more of a priority with luxury properties. When buyers or renters are surveying a unit, they’ll want to make sure it checks all of the boxes, including proximity to nearby shopping, conveniences, and entertainment. If they’re eyeing a property in a neighborhood, the surrounding homes should be comparable in value and feature premium craftsmanship. 

According to one recent report, nearly 50% of all buyers cite the quality of the neighborhood as the number-one factor they consider when looking for a new home. If you can catch their eye before they even walk through the front door, you’ll be one step ahead. 

3. Market Conditions

Savvy real estate investors know that the market is never stagnant. Monitoring the conditions helps you ensure each investment is as profitable as possible. For instance, when it’s a seller’s market and demand exceeds supply, you can increase rent or sale prices in your favor. Likewise, when inventory is high and sales dip, a competitive pricing strategy can be what sets you apart. 

With luxury real estate, there’s even more money on the line. It’s smart to keep a close eye on the properties that surround yours to gauge if they’re increasing or decreasing in value, then adjust your sales approach accordingly. 

4. History of the Property

A property might seem luxurious based on the premium fixtures, expensive furniture, and extravagant finishes it contains, but take off your rose-colored glasses and get out your magnifying glass instead. It’s important to learn as much as you can about the home or unit before putting it on the market. Some of the top questions to ask include:

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• Are there any immediate, red-flag issues you need to know about? 
• Has the home been involved in any type of disaster, such as a fire or flood?
• Is the foundation intact or is it cracked/crumbling? 
• What is the reputation of the property and the surrounding neighborhood?

All of these factors can affect your ability to rent the property out or sell it at a profit in the future. While the issues you find might be fixable, you don’t want to go into a deal unaware. If you’re willing to look beyond surface-level glamour, you may uncover critical details that need your attention. 

5. Future Considerations

In addition to the home’s past, you also need to know about its future. You don’t want to invest significantly into a luxury property only to discover that it could undergo major changes down the road. Start by asking about any local construction projects that could undermine its long-term outlook. For instance, are there plans to build a new neighborhood directly across the street? What about any current or future Department of Transportation (DOT) initiatives, such as highway expansions?

Even if they don’t directly affect your property, such plans can lower its inherent value. At the same time, the opposite also holds true. If you learn that the city wants to expand nearby amenities or add new green spaces, for instance, those projects can add value to your investment. Either way, it’s smart to know what to expect. 

6. Key Players

Finally, you need the right real estate experts by your side any time you invest in a luxury property. This team can help you navigate the market, browse potential properties, and choose the best one for your needs. They’ll also walk you through financial logistics, ensuring that you’re getting the most value for your money. 

At Temple View Capital, we’re experienced in all aspects of real estate investing, including luxury acquisitions. We know how to help you maximize your profits and expand your portfolio, whether this is your first property or you’re a seasoned investor.

Looking for real estate lending solutions you can trust? From DSCR loans and bridge loans to rehab loans and ground-up construction loans, our private mortgage lenders can help you secure the property you want. To learn more, contact our team today!

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