Real estate is a popular investment class, and luxury real estate offers some unique opportunities. If you have the financial resources available, here are several reasons to invest in luxury real estate as opposed to some other investment opportunities.
Diversity Your Asset Holdings
At a time when the stock market is quite volatile, luxury real estate offers diversification and relative calm. Without wild daily swings up and down, the luxury real estate market leaves you with less turmoil on a day-to-day basis and provides a safe haven for funds that you don't want exposed to stocks.
If you currently have money in stocks or mutual funds, luxury real estate might be a nice alternative during these uncertain times.
Manage Fewer Real Estate Properties
Compared to lower-priced real estate, luxury real estate allows you to manage a fewer number of properties and still invest the same amount. For example, you could purchase 10 $100,000 homes if you wanted to invest $1 million in real estate. In contrast. You could buy just two $500,000 homes or one $1 million home and still have the same amount invested.
The fewer properties you need to manage, the less time you'll have to spend addressing property-related issues. Assuming all houses are in the same condition, a portfolio of 10 houses will break down 10 times more often than a portfolio of only one home.
Even if you have a property management company oversee your real estate holdings, saving time is still beneficial. When the management company can spend less time managing properties, they don't have to charge as much for their service.
Leverage Your Financial Resources
Even if high-end luxury real estate costs much more than what you currently have available, you may still be able to purchase this type of asset via a loan. Real estate purchases are commonly financed, which lets investors get into the market before they have all of the money needed to pay cash for a property.
Moreover, financing properties is a common investment strategy as it allows you to leverage the resources you do have. Through leveraging, you can:
Even when investors have plenty of money to pay cash for a luxury property, they might still choose to finance it in order to take advantage of these items.