The North Shore is a charming section just north of Chicago with quaint towns and villages. Some areas border the tranquil waters of Lake Michigan. Others have lush green fields, dense woodlands, and meandering lagoons. They all have a picturesque quality and unique features that make them idyllic places to live. They are also ripe with opportunities for investors.
The luxury market is not the same as the average housing market. First, it has a global reach. The buyers and renters may come from another state or another country. Second, the expectations are different. The buyers and renters expect more than just the usual. Read on for tips about purchasing luxury investment properties.
What is the goal for the property?
Before searching for an investment property, investors must decide on their end goal. Will this be a short- or long-term investment? Investors flip houses for a quicker return on investment (ROI) or use the homes as rental properties for long-term gains.
While flipping a property will bring a quicker ROI, there are advantages to creating a rental unit that will bring in a stream of passive income over time. Keep in mind that rental units can always be sold at a later date. Therefore investors may make more money in the long run.
However, rental units also have maintenance costs that investors will not incur when selling a property outright. Expenses, such as hiring a property manager, advertising the unit, and screening renters, also come into play. In addition, luxury rentals may demand higher prices, but the occupancy rate will be lower than standard rentals.
Property type
Once the goal is established, the next thing to consider is the property type. The decision to buy a grand estate or a posh condominium will have a lot to do with the location and the goal of the investment.
Next, determine whether to buy an existing house or condominium in mint condition, a place to renovate, or a lot to build a new home or complex. Purchasing a home in mint condition works well if the goal is to own rental property. Without having to renovate, investors can make money on day one.
Building a new home or renovating an existing property works for flipping and renting. The drawback of these options is the time and expense involved. It will take longer to build a new home than to renovate one, but investors may face financial challenges and delays in both situations.
Laws and regulations
Local laws, regulations, and taxes are other considerations for investors. Each state has its own rules involving rentals and flips. How long an investor owns a property and the length of time they live in it before they sell determines if they pay capital gains tax once they sell it. If they live in the home for at least two years and do not sell it for five, they may avoid paying capital gains on the sale.
Investors that plan to purchase property abroad must investigate the laws and regulations in those areas. Other countries do not deal with real estate in the same manner as the U.S. For example, some places, like Turks and Caicos, do not have income, property, or capital gains taxes, and ownership is protected. However, other territories or countries may have harsher rules. Some can seize property, and owners have little, if any, recourse. A knowledgeable real estate professional can guide investors in these areas.
Market research
Once an investor has determined their investment goals, it is time to research the housing market. Investors can search online for the average home sale values and rental potential in different areas. Make sure the location is not already over-saturated with luxury properties.
Real estate professionals are invaluable resources in this regard. They have personal connections and access to more data than the average person can find through online searches.
Location, location, location
People who buy or rent luxury homes expect the home to be in a desirable location. The most lavish estate will only find a buyer or renter if it is in an area with natural or commercial appeal. For natural think beaches, mountains, and resort locations. Think of homes in sites with tremendous views. For commercial, consider places with attractions like the entertainment venues in Chicago, New York, or Las Vegas.
Think about what type of tenant or buyer will be attracted to the area. There are different amenities expected at a luxury ski resort town than at a beach town. Also, what are the transportation options like? How close is the property to everyday necessities like grocery stores? Is the property close to points of interest?
Quality
Whether an investor is building a new home, renovating an existing home, or buying one already in mint condition, the quality of the building materials is essential. They cannot be substandard or standard. This is a luxury home, and it should be evident at first glance.
The home must be made of high-quality material and able to withstand the region’s environmental conditions. If the house is in a cold weather climate, it should be able to handle harsh winter weather conditions. If it is near the ocean, it ought to be able to bear the brunt of the salt water and tropical storm forces.
The quality of the materials used and the design of the interior also have to be top-notch. Buyers and renters of luxury homes expect the best, and they are paying a premium for it.
Amenities
What makes a home a luxury property is not just how much it costs. Luxury properties are rich in amenities not always found in the average home.
- Spa bathrooms
- Luxury walk-in closets
- Back kitchens
- Outdoor kitchen and living spaces
- Gaming and screening rooms
- Wine cellars
- Pools, hot tubs, and spas
- Smart technology, i.e., lighting, audio, appliances, etc.
- Security, i.e., security systems, security shades, etc.
- Eco-friendly features, i.e., solar panels, electric charging stations, etc.
- Health and wellness, i.e., home gym, yoga studio, massage rooms, etc.
Let the Richker Group help you
Investors entering the luxury real estate market stand to make considerable gains in the short term or passive income in the long term. Knowing where to start and what to do is half the battle. Any real estate agent can take you on a tour of homes, but why accept the bare minimum?
Enter the Richker Group, masters in the art of real estate. Rick Richker has experience in sales, renovation, and investment projects. In 2022, Chicago Magazine named him one of the top-ranked brokers in all of Chicagoland.
Whether you are looking for a home for sale in Northfield, ready to sell your current home, or searching for an investment opportunity, Rick is the dedicated professional you need on your team. Call him today.
