Are you considering investing in luxury properties? Many will tell you that real estate investing is a wise way to diversify your portfolio. Luxury homes, however, are in a league of their own. You’ll be working in a different market and investing more money. But the greater the risk, the better the rewards.
If you’re a first-time investor, here are some tips and ideas on investing in luxury homes.
Explore your financing options
Unless you’re buying in cash, it pays to know your financing options. For luxury properties, the main option is to get a jumbo loan. This type of mortgage allows you to borrow more money than conforming loans.
In James City and York Counties in Virginia, the conforming loan limit is $548,250.
That said, jumbo loans also require you to make a bigger down payment. And in order to qualify, you need a higher income level and a near-perfect credit score, or at least 700. Consult with your financial advisor and your preferred lender or mortgage company to see how much you’re qualified for before you start looking for luxury properties.
Determine your goals
What do you want to do with your luxury real estate investment? Determine your goal as early as possible. It’ll help shape the investment process and influence your decision-making.
- Do you want to make a quick buck? You might want to consider flipping luxury homes. Find a mansion that’s selling for less than its market value, bring your luxury home decor ideas to life on the remodel or renovation, and then resell it again for a profit. In Virginia, the ROI on house flipping during the second quarter of 2020, was 59%.
- Do you want to generate a more consistent income? You can consider dipping your toes into the world of high-end rentals. Find a long-term tenant or market the property as a luxury vacation rental.
If you’re going to pull out all the stops, you can finance a custom-build luxury property, then rent it out or even sell it once it’s complete.
Choose a highly coveted location
“Location, location, location” matters, especially in luxury real estate. Whether your goal is to flip and resell or open a luxury rental, concentrate your search in areas that are aligned with your business interests.
If you’re investing in luxury real estate in the city, hone in on properties located or close to retail, dining, and entertainment options. Scenic views, accessible transportation, and excellent schools also count. All of these things will make or break your luxury real estate investment.
Pick the right market
When you’re investing in the seven-figure range, it’s essential to be certain that the demand is strong. You’ll want to invest in an area with an upward trend in sale and rent prices.
Conduct a rigorous market analysis of the location you’re eyeing, not only to determine how much it will set you back, but to forecast how much you’ll eventually earn from the property.
If you want to purchase luxury property in the city, you’ll need to check out the following:
- Current job market
- Cost of living
- omparable market analysis
- Median household income
- The neighborhood’s overall economic outlook
If you’re investing in a luxury vacation rental, you’ll need to know its conditions during peak and off-peak seasons.
Get the best amenities
If the property will serve as a long-term rental or a vacation home, make sure that it offers top-of-the line amenities. Your luxury property has to rival any five-star hotel or destination. Luxury renters expect nothing but the best of the best. Consider amenities like:
- State-of-the-art security systems
- Home gyms
- Rooftop pools (if you’re buying a highrise)
- Spacious recreational spaces
Hire a real estate agent that’s an expert in luxury properties
You’ll want a real estate agent in your corner, someone who knows the neighborhood like the back of their hand. You’ll also want someone who’s dealt with luxury properties for some time – their experience means they know how to deal effectively with this exclusive market. Vet their credentials, especially if you’re investing in a luxury property from out of state or town.
If you’re a local, you’ll have a good idea of the best areas in your community. But if you’re new to the place or buying from somewhere else, an agent will help you narrow your search. Some even have insider information on homes that are not yet even listed – or those that will never be seen on a multiple listing service because the owner has chosen to restrict the sale to an exclusive pool of potential buyers.
Invest in Williamsburg luxury real estate
Let Coldwell Banker Traditions lead the way so you can explore the best luxury real estate investment options in Williamsburg, VA and the Hampton Roads area.