What to Know Before Taking the Plunge into Luxury Real Estate Investing

By Elsie Dudukovich0 Comments
It’s easy to see the appeal in investing in foreclosed or distressed properties.  As with any investment, doing your research and due diligence can unearth the diamonds in the rough and yield an excellent opportunity for long term gains.  Yet, there are other markets to explore as you research potential opportunities.

Luxury properties present another real estate sector for investors to consider. While the news continues to report on how companies and individuals across the country are still recovering from the financial crisis of 2008, the luxury market is showing gains.  According to Knight Frank’s 2013 Prime Global Cities Index,  areas such as San Francisco, New York, and Los Angeles showed double-digit price increases from their 2012 studies. The limited availability of luxury homes in these areas helps to support the high prices the properties demand, but there are other factors to consider.   

It’s no surprise price is the main criteria in determining if a property can be classified as a luxury property, but even this detail can be subjective and relative to the properties in that area. Seeking the assistance of real estate agents or companies who specialize in luxury/high-end properties is often necessary in navigating these markets.  If an area is considered highly desirable for the wealthy as a primary residence or vacation home, it is likely there are luxury properties there. 

Extra features such as privacy and security measures, welcoming spaces for lavish entertaining, and luxurious amenities such as a spa-like bathroom or a professional grade kitchen become serious considerations for an attractive high end property. These are details the qualified real estate agent can assist you with, especially if you find yourself new to this market and its customers.

If you are interested in investing in luxury real estate, there are a number of resources to help you get started on that path. Since prices can start in the millions, partnering might be something to consider as a way to fund your investment. 

As with any self-directed IRA investment, make sure you have the ability to pay for any expenses associated with the investment from your IRA according to its percentage of ownership in the property.  This rule applies to everything from building and remodeling expenses for rehabbing a home to covering taxes or homeowner’s association fees.  If you decided to invest in international properties, make sure all of the paperwork provided is in English and that you allow for extra time for review.  A little extra planning can go a long way.