Luxury property investments, when done properly, can be extremely lucrative. American property investor Stephen Ross is worth $7.6 billion and is the 191st richest man in the world, according to Forbes. So if you’re aiming to start investing in property, you need to be smart about it. It helps to know what you should ask yourself beforehand. So what questions can help?
Create or Buy?
Investing in property is ideal for those who are in it for the long haul, says Bethenny Frankel. She goes on to say that properties, particularly residential ones, can generate year-round income. The question boils down to whether or not you’ll be buying an existing property or bringing in custom home builders to create the luxury property. Land bought for around $8.7 million can have a luxury property built on it for an additional $18 million. A project such as that can have a projected selling price of $50 million, says Jay Belson of Jay Belson Luxury Real Estate. The payoff can be bigger but it will require a longer turnaround. So it’s important to ask yourself if you’d rather create a property or buy existing ones.
How Do You Finance It?
As you may be aware, any investment you get into will require sufficient capital. For luxury properties, you will need at least $1 million to buy property in any major cities around the world. If you choose cities around the US, places like San Francisco will require a minimum of $3 million, according to Christie’s. So you need to ask yourself how you plan on financing your future property investment. You have the option of using personal capital or taking on a mortgage to finance your investment. The option of seeking a co-investor will require a lot of planning and legal work to ensure that you and your investment are sufficiently protected. At the end of it all, go with a financing option that you are comfortable with and won’t put your finances in jeopardy.
Is This The Right Market?
If you’re seeking to take a bite out of the above-seven-figure price tag property market, you need to make sure that there is a demand for what you’re planning on selling. Investing in property requires that you take the temperature of the immediate area. It pays to find out what the job market is like so you can determine the cost of living and spending power is there. Trying to sell a high-cost property to a low-income area is like buying pricey ice cream and leaving it out in the sun to melt. Ask yourself if the market you’re looking at is right so you won’t end up with a pricey building that no one wants to buy.
Investing in luxury properties can be challenging but the gains are worth it. As a potential investor, you need to carefully weigh all the factors that will have an effect on your portfolio. So before making a commitment, take some time and ask all the relevant questions. Doing so will bring you one step closer to picking out a luxury investment that pays for itself in a few years.
Taki has +15 years of experience in global markets. His methodology is unique and effective, yet easy to understand; it is based on chart analysis combined with intermarket / fundamental / sentiment analysis. His work appeared on major financial outlets like FinancialSense, MarketWatch, ... Email: email@example.com. Twitter: twitter.com/investinghaven