Many investors know how important it is to branch out and diversify their types of investments or properties. For instance, if you’ve been in the real estate game for a while now, you might consider investing in luxury real estate to switch things up. However, there’s a lot to consider with luxury real estate. Read along to learn about luxury real estate, the pros and cons, and how to find the best tenants for your luxury rentals.
Contents of This Article:
- What Is Luxury Real Estate?
- What Do People Look For in Luxury Real Estate?
- Pros and Cons of Investing in Luxury Real Estate
- Who Are Your Target Tenants?
- How to Find Tenants for a Luxury Rental
What Is Luxury Real Estate?
When you hear the words “luxury real estate,” you may think of several factors that make a property luxurious. For instance, you probably think of a large, expensive property with high-end, valuable amenities. That’s precisely what luxury real estate consists of.
Investing in luxury real estate means looking for high-end properties in prime locations. Most luxury properties are large, expensive, and made with high-quality materials. In addition, many luxury properties are within the top 10% of properties on the market. So, depending on where you’re looking to invest, these properties range from a few million dollars to several million dollars.
When considering luxury real estate, you probably think of a large single-family mansion. However, high-end properties can include single-family, multifamily, and even new construction builds. Each option can be extremely rewarding, depending on your investment strategy.
For instance, if you’re looking to fix and flip a luxury property, you can buy it for less than normal, fix it up, and earn significant returns on your investment. On the other hand, you can buy a luxury condominium with high-end amenities and rent out each unit to high-paying tenants.
Ultimately, there are several ways to be successful by investing in luxury real estate. One of the most crucial steps is finding property managers in Philadelphia to help manage your property. But next, we’ll review why some investors choose this investment method as their path to success and what to look for in a luxury property.
What Do People Look For in Luxury Real Estate?
Luxury real estate isn’t just defined by higher prices and larger homes. Instead, there are certain features of luxury homes that people look for. After all, several factors other than price make a home extraordinary. That said, here’s what most people look for in a luxury rental home.
Square Footage
Most high-end buyers and renters are looking for more space within their homes. As such, one of the main factors to think about while investing in luxury real estate is the property’s square footage. Remember that the larger the property, the more maintenance you’ll need to consider, but the higher your returns will be.
Great Location
Another major factor to consider while investing in luxury real estate is the location. Homes near popular destinations, like beaches, golf courses, or ski resorts, can be considered luxury real estate due to their close proximity.
Home Office
With more people working at home due to the pandemic, home offices are a huge must-have for luxury properties. Luckily, it’s not hard to find luxury homes with offices or the space to make one within the home.
Swimming Pool
Another desirable amenity for luxury real estate is private swimming pools. While they cost more to maintain, most high-end renters are willing to pay more for a property with a pool or similar amenities, like a private gym or outdoor rec space.
Smart Technology
One of the main draws to many luxury properties is smart technology and sustainable features. For instance, many people are drawn to innovative features, like smart thermostats, security systems, and lighting options you can control from your smartphone.
Pros and Cons of Investing in Luxury Real Estate
Like any investing strategy, there are some pros and cons to investing in luxury real estate. While it allows you to earn significant returns, you must consider the higher buying costs and processes of buying luxury real estate. So, read along to learn more about the benefits and disadvantages.
Pros of Investing in Luxury Real Estate
- Higher Returns– When you put more into your investment, you can get more out of it. So, when you buy a high-end home, high-end tenants will pay more to live there.
- Lower Maintenance Costs– Luxury properties are generally maintained better than your typical single-family home. Additionally, since they’re maintained so well, they tend to have a longer life span than regular homes. As such, you can spend less time and money on maintenance and put it toward something else.
- More Market Stability– Since most luxury homes are built with high-quality materials, they won’t depreciate as quickly over time. Additionally, with top-notch property management, you can rest assured knowing your rentals are well-maintained, even if you’re not there. As a result, they’re generally more stable over time than typical rental properties.
Cons of Investing in Luxury Real Estate
- Higher Initial Costs– Luxurious properties are much more expensive than buying other residential rental properties. So, having enough cash on hand to purchase a high-end property is essential.
- Unique Requirements– Investing in luxury real estate requires a ton of knowledge, understanding, and due diligence. So, you’ll want to do research to ensure you know what you need to do to have a successful investment property.
- Longer Buying Process– Investing in luxury real estate generally takes longer than buying a regular single-family home. After all, the market is smaller, with fewer properties available. This strategy may not be the best option if you’re looking to invest now.
Who Are Your Target Tenants?
A large part of investing in luxury real estate is finding tenants that suit your properties. After all, you can’t expect just anyone to rent out your luxury home and maintain it while they’re there. As such, it’s important to identify your target tenants.
Your target tenants for luxury properties will likely be well-established individuals or families looking for a high-quality home to live in. So, when you’re marketing your luxury rental online, try to draw in renters that will suit the property. After all, you likely wouldn’t market a luxury mansion rental property to college students or first-time renters. So, consider the following factors when determining your target tenants:
- Age
- Hobbies
- Lifestyle
- Income
- Interests
- Occupation
Remember, you’re not narrowing down whom you’ll rent to based on these factors, as that would be discriminatory. Instead, you’re getting a better idea of your ideal tenant while you market your rentals online.
Additionally, you’ll want to pay close attention to the tenant screening process for luxury rental properties. For example, suppose you have people interested in your luxury property. In that case, you’ll want to go forward with a thorough tenant screening, looking at their credit history, rental history, income, and background check.
How to Find Tenants for a Luxury Rental
If you’re investing in luxury real estate, finding quality tenants to occupy your properties is important. Unfortunately, not everyone is qualified or able to afford such high-end living conditions. As such, investors need to have a process for finding tenants and managing their luxury properties.
Most investors know that excellent marketing and a solid tenant screening process are key to finding high-quality tenants. Luckily, Bay Property Management Group has what it takes to easily manage your rental properties.
Need More Advice? contact us today!
Not only can we help find qualified tenants, but we can ensure your rentals are well-maintained 24/7. So, if you’re looking for top-notch property management for your rental properties, contact BMG today. We offer comprehensive rental management services near Baltimore, Philadelphia, Northern Virginia, and Washington, DC.