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Nubricks Blog - Main tips to remember when buying luxury real estate

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03 Apr 2017

Main tips to remember when buying luxury real estate

Real estate investments can easily add portfolio diversity and even create sustainable passive income. When the investment budgets available are high, it is always possible to invest in luxury real estate. Various agents like The Luxury Team are specialized in such investments but how do you make a very good choice? This is the most important thing to consider at the end of the day. While there are so many things that one can say about what to think about as you buy luxury real estate, the following facts are definitely the most important.

Identify Luxury Real Estate Investment Goals

In most cases the goal is to reach a high ROI for the money you pay. There is no strict recipe that you would need to respect in order to get that great return on the investment made. As you choose luxury real estate property, you have to take a good approach that is based on what you are interested in. As an example, if your goal is to make a profit fast, you are interested in real estate property flipping. You would find a bargain luxury home, you renovate and remodel it. Then it is put back on the market. When the home sells fast at a higher price you make a quick profit.

In the event you want to get some income on the long term, you want to focus on something that would be rented out or you could focus on an apartment building. Even financing a custom luxury real estate project is a viable option.

Financing Your Investment

When you will invest in a luxury real estate property a vital aspect is to think about how to bankroll your choice. If the funds available are numerous, you can just pay cash for the luxury real estate. In this case you have everything debt-free. If not all money is available, borrowing money will be necessary.

As an example, let’s say you found a wonderful foreclosed mansion that you could re-sell at a very high profit. Value is of around $1 million and after renovations you could sell for $2 million. A hard money loan may be great in this case. They are short term loans, with higher interests. When all goes well you can make a very high profit but if things go bad, you are faced with a lot of debt. You need to carefully choose financing for your investment.

The Right Market

Whenever you invest in luxury real estate you have to be 100% sure that there will be demand. Market temperature checks are very important when you invest. If there is no demand for what you buy you will have long term problems that could have easily been avoided. As an example, when you invest in major metropolitan areas, you have to think about living costs, job market, median household incomes, economic outlook and comparable home sales prices. Always be sure that you buy when the market is right or you would end up being the owner of a property that will not sell or find tenants.
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