Luxury real estate is seldom used as an investment because it does require a lot of capital -- but that doesn't mean that it is a bad idea. With the proper real estate agent, luxury investments can be a fantastic way to make a fair bit of money. Here are some of the pros and cons of using luxury real estate as an investment (or flipping it), in addition to some ways you can mitigate risk.
Pro: Luxury Properties Keep Their Value
Luxury neighborhoods tend to be very supportive of their own property values. Not only do homeowners in these neighborhoods take impeccable care of their homes, but they also have a vested interest in improving the common areas and streets around them. During times of economic crisis, a luxury property may go down in value -- but it will usually recover faster than surrounding properties.
Con: Luxury Properties Take Longer to Sell
Luxury properties do take longer to sell, which means you may need to pay the mortgage for longer. This is simply because fewer individuals are purchasing luxury homes at any given time. But a luxury property, when it does sell, will make more -- a single luxury home flip can net millions. It really depends on how much you're willing to invest and how long you can wait.
Pro: Luxury Properties Represent More Profit
When a luxury market does go down -- as noted -- it usually does so only temporarily, but the prices can drop a greater percentage than for other houses. That is because other houses have far less to lose. Luxury properties consequently represent far more profit for a savvy investor who can identify markets before they rebound.
Con: Luxury Properties Can't Be Rented Out
Unlike other properties, a luxury property can't be rented out for an investment; though it's possible to do, it's unlikely you'll find a renter willing to pay the high rents, and even if you do you will need to worry about issues such as property damage and eviction. Because of this, it's usually best to deal with a real estate agent who can help you sell your property faster, as it won't be gaining money while you hold it.
It's always important to get a knowledgeable real estate agent to help you when you're considering investing in property, especially when the stakes are as high as a luxury real estate loan. The best real estate agents will be able to pinpoint the markets that are currently depressed, and tell you exactly how much profit you stand to make. Contact a company like Remo Paul Group to learn more.