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The first timer’s guide to investing in luxury real estate

By LLM Reporters on 15th July 2021

Thinking of investing in some real estate this year? Expanding your portfolio with some new luxury properties can be a great way to expand your portfolio – but before you dive in head first, it pays to learn the ropes, because not everyone who has the capital is equipped to see success without the right knowledge behind them.

Hiring reputable real estate agents is one way to lighten the load and break free of the overwhelm that can often come with embarking upon a new venture, and will place you in good hands to support you in making the right decisions – but it’s still wise to have an understanding of the playing field before you start to make the most out of your investments.

There’s a lot to know about the property market, and contrary to popular belief amongst the inexperienced, it’s about much more than simply finding the cheapest residence and renting it out to the first available tenant. 

Real estate differs in not just each country, but in every neighbourhood of every city in any country, so you’ll find that property prices, HOA guidelines and other factors vary across each. While any given opportunity might seem like a worthy investment, a smart investor always weighs up the pros and cons of the situation thoroughly before rushing into a decision, regardless of any time-limit given to them by the seller or agent. 

If you’re unsure where to start with your investment journey, then look no further – because we asked the experts at Poway Real Estates – a leading California luxury real estate agent – to share their top tips for success.

Set a budget

signing contract to buy house
You’ll need to consider  maintenance charges and other additional service charges such as parking

The first thing an investor needs to think about is the capital they have available for their first piece of real estate. This is important because a lot of people assume the property asking price to be the final quotation, and people who consider all of their budget as their investable capital often get overwhelmed when other expenses get piled up on top.

If you’re not investing in a stand-alone property like a suburban house, you’ll need to consider maintenance charges and other additional service charges such as parking. Even when money is no object, our fortunes are precious – so make sure you’re not wasting any money you don’t have to and keep a maximum budget in mind to cover all costs.

Location, location, location! 

houses in london
Location is the factor that has the greatest influence on how much a property can sell for

The only thing that separates the value of a castle in the middle of nowhere and an apartment in the middle of New York City is the location factor – and believe it or not, you won’t be able to buy that NYC apartment even if you sell your castle and more. 

Location is the factor that has the greatest influence on how much a property can sell for. The location of a property is firstly judged objectively, and then subjectively – which means that when you view a property, you must first try to make sure that you’re making the best objective choice before deciding if it is something you feel drawn to on a more emotional level. 

When judged objectively, a location should offer all of the local amenities that potential tenants might need to enjoy a convenient lifestyle and excellent all-round quality of life. Likewise, accessibility is important, so look for a property that comes with excellent transport links to the local area and major surrounding cities.

Amenities and facilities 

luxury house with swimming pool
Amenities you might want to consider include those at the property itself, such as a garage, back garden, swimming pool and indoor smart appliances

Whether you’re looking for a property to live in yourself or to rent out later, your criteria for judging the property should remain the same. Since all luxury tenants are likely looking for the standard of lifestyle that you’d want for yourself, it’s best to check out properties as if you intend to live there yourself to effectively put yourself into their shoes and gain a thorough understanding of their needs.

Amenities you might want to consider include those at the property itself – such as a garage, back garden, swimming pool and indoor smart appliances – but access to community amenities is also important. If you’re hoping to attract families with children, then this might include being near to good schools and nurseries, while proximity to a selection of shops and restaurants, as well as leisure facilities and a local GP surgery is something that will appeal to just about everyone.

Hiring a real estate agent 

Senior couple visiting luxury villa with real-estate agent
The most common mistake made by new investors to the luxury real estate market is failing to hire experienced real estate agents

The most common mistake made by new investors to the luxury real estate market is failing to hire experienced real estate agents. While flying solo might seem like a tempting way to go, there are a multitude of factors you might find yourself having to deal with that you hadn’t considered, so bringing in the professionals is vital if you’re still learning the ropes.

A real estate agent is perhaps the most formidable ally in the market to have by your side. An experienced individual who has spent years in the local market, has a thousands-strong set of clientele and a wide network that comprises tenants, property owners and sellers alike can make all the difference when it comes to securing the right properties to boost your portfolio. 

A quality real estate agent will not only look for properties on your behalf and present you with options that meet your specified criteria – thus saving you hours of your own time – but they will also negotiate with sellers and research property backgrounds so that you don’t have to. You will also need a realtor if you want to get your property transaction verified by the right departments of the government, so be sure to have one in place before you’re ready to make your first purchase.

A final word

When it comes to investment vehicles, experts agree that real estate is safer and less volatile than stocks, gold or currency

Whilst it might be tempting to invest in the first property you hear about when you have the capital, this is where smart and failing investors differ. While the former conducts thorough research and makes five to six visits to each property before making a decision on an option, the latter might make a more spontaneous decision – so be prepared to play it cool and take your time to avoid making a mistake.

Real estate is a slow market that can offer some incredible opportunities whenever there are new developments in a desirable area, so pay attention to planning applications and keep your finger on the pulse of what might be about to change. If there’s a mall or a community opening up near somewhere, you can be sure that the property value will appreciate eventually nearby, which could place you in a valuable position to make a substantial long-term profit.

As they say, patience is a virtue, and it certainly couldn’t be truer with real estate. While experienced investors can make shrewd moves more quickly, those starting out should be prepared to take it easy. Slow down the pace, and you could soon have your perfect investment property under your belt, and yet another stream of income to fund a prosperous future.