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Is Luxury Real Estate A Good Investment?

Mansion in San Francisco

A San Francisco mansion with a view of the bay

The short answer is yes. The long answer – luxury real estate is a great investment because of the excellent rate of returns, particularly because the prices of such properties only tend to grow with each passing year. If you’re searching for new assets to diversify your investment portfolio, then high-end properties deserve your consideration.

What Makes A Property “Luxury”?

The standard for what’s considered luxury these days varies significantly depending on location. For instance, what may be considered posh in smaller markets such as Oklahoma City may just be average in a prime market such as Los Angeles. Generally speaking, a piece of luxury property relates not only to its refinement, exclusivity, and quality but also the prestige that it bestows upon its owners. It’s important to understand what characterizes a luxury property in the market that you wish to invest in before spending your money. Working with a top-rated local real estate agent can be very beneficial in this regard.

With that in mind, here are two major reasons that make luxury real estate a worthy investment.

Significant Long-term Returns

Real estate investment is a type of long-term investment, and the general rule is that the longer you hold on to a property, the greater your returns. As the value of your property appreciates, so too will your profit potential. That said, while real estate markets are generally considered stable, the high price points of luxury properties mean they are more vulnerable to big price drops in case the market fluctuates. It is for this reason that timing is of the utmost importance when buying and selling luxury properties. As long as you can logically determine when to buy or sell and can do so when market conditions are favorable, then the luxury real estate can be a profitable avenue for you.

Multiple investment options available

Equally important as timing is knowing how to make money from luxury properties. As a real estate investor, you must do your due diligence to ensure your investment generates the income you desire. For example, using your luxury real estate as a vacation rental is one of the most common ways to make your property profitable. Take luxury high-rise apartments in San Francisco as another example. The target tenants for these properties are high-earning individuals who yearn to reside in strong, affluent SF communities such as Pacific Heights, Noe Valley, and South Beach. The assured income from this type of tenant makes this approach a suitable option.

Luxury house flipping is also on the rise, as more and more investors realize their profit potential. Homes in high-end markets are great for flipping because they offer plenty of advantages over lower-end homes. For instance, many luxury properties are in a better condition than the average foreclosed property, which translates to fewer areas of the home to renovate, shorter flipping times, and lower risks.

Luxury apartments and condos are often found in more attractive residential communities, making them a safer investment with better potential for reselling.

How about using your luxury property as a private venue for special events and occasions such as weddings, anniversaries, birthday parties, and the like? From engaged couples to corporate planners, the well-to-do are willing to spend six figures a day on an exceptional space for their celebrations. However, there are legal considerations to take care of if you want to go this route, including those related to taxes, insurance, contracts, security deposits, local ordinances, homeowner bylaws, and more. A savvy real estate agent can provide valuable guidance as you navigate these legal complexities.

Is luxury real estate investment right for you?

Many real estate investors have generated substantial revenues from their upscale properties. With timing, know-how, intuition, a bit of luck, and a network of contacts you can count on, you could be among those who have made their fortunes investing in luxury real estate.

Regardless of how you choose to use your property, the most important thing to remember is to utilize the space for maximum returns and harness features and amenities to their best use. Above all, you also need to know how to market your property effectively to give it maximum exposure to the kind of clients you’re after.

From attractive studios to luxury high rise apartments in San Francisco, Nina Hatvany and Team Hatvany have represented the best real estate in the Golden City. With over 20 years in the business, Team Hatvany has helped many real estate investors make the most of their money. Contact us at 415.345.3022 or team(at)teamhatvany(dotted)com.

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