Investing in luxury real estate is appealing to many successful investors. Luxury real estate expands and diversifies investment portfolios, provides stability in volatile markets and has the potential for a strong return on investment in the long term.
Right now, Canada is experiencing rising interest rates, forcing a downturn in the real estate market. The good news is the luxury home market remains resilient. With thoughtful timing, thorough research, and expert input, you can secure the best price now to receive a significant return in the future.
Luxury real estate demand
People want to live in luxury homes because of their unique style and exclusive amenities. When a property is in the right location, has beautiful surroundings, and has overall high-end features, it will become more attractive to the target clientele.
Recently, Mercer’s Quality of Living rated Vancouver the fifth best place to live in the world and the top city to live in North America, so it is not unexpected that the world’s affluent buyers are still lining up to purchase homes in this highly sought-out town.
Three of Canada’s top cities, Vancouver, Montreal, and Toronto, have become popular cultured cities, and all three of them have continued to have a short supply of luxury homes in high demand.
Luxury market resilience
The luxury home market in Canada is relatively unfazed as interest rates continue to climb in Canada, and the overall housing market is facing its first downturn in several years. Buyers outside of this market rely on financing to buy homes, whereas luxury home buyers can purchase properties with cash.
In April 2022, Toronto homes were listed at $1.5 million and oversaw a 30% rise in sales compared to the previous year.
Homes continue to sell quickly; according to The Institute for Luxury Home Marketing, the average days on the market for luxury homes dropped from 38 days in February 2021 to just 11 days in 2022. Not only are these homes selling quickly, but the selling prices also continue to rise.
With luxury real estate in your investment portfolio, you are relatively safe from economic factors that drive the stock market down, and the rebound from downturns tends to be strong. It has been and continues to be a desirable asset.
How to buy luxury real estate
One of the most critical factors when adding luxury real estate to your investment portfolio is to navigate your entry point. The market cycle matters, so buying could mean the difference between profit and loss. Before you commit to making this substantial purchase, some essential considerations will improve your rate of return.
Know your goals
Of course, your goal is to maximize your return on investment, but you need to identify precisely how you plan on getting that return. If you want a quick profit, flipping might be your strategy, but if you are thinking of long-term investment, you may want to focus on a vacation home that will produce income by renting it out.
Know your budget
If you don’t plan on paying with cash, you will probably need a jumbo loan to finance the property. You’ll need an excellent credit score and a debt-to-income ratio below 43%. Count on proving your liquid assets and have enough cash to cover six months of mortgage payments.
Analyze the local market
Entering the market at the right time is key to maximizing ROI. Take the national economy into account, but dive deeper into the local market by looking at comparables and analyzing whether those home values are increasing or decreasing. You also want to know how property taxes factor into your budget.
Decide on your non-negotiables
Know what amenities you want in a luxury home before you start looking. Everyone has different non-negotiables when they start looking at properties to buy. Make sure to distinguish between what you must have and what would be nice.
Remember, high-end buyers, want luxury features like a chef’s kitchen, ample outdoor living space, a home theater, and temperature-controlled wine cellars. Do your research to determine which features luxury buyers want the most and decide from there.
Research the neighborhood
Location is vital when buying a luxury property, and home buyers want privacy and easy access to area amenities. Check if there is a country club in the area, high-end boutiques, and other attractive entities.
Resale value
Special considerations include whether it is a waterfront home or has an incredible view. Also, consider aspects of the property’s location, like proximity to a busy road or the sunlight the house gets. These are things you can’t change and which could be deal breakers.
Find out what houses in the neighborhood are worth. It’s not necessarily better to have the most expensive or exclusive home in the area.
Look for customized features like a heated island countertop in the kitchen made with granite or quartz, spacious walk-in closets in the bedroom, and multiple shower heads in an extra roomy shower. These decorative features make a home more elegant and sophisticated, drawing buyers in and contributing to a higher return.
The bottom line
Investing in luxury real estate can be lucrative if you are in it for the long haul, and it is a perfect venue to diversify your portfolio. The investment has the potential to provide you with regular cash flow, tax advantages, and substantial appreciation.
You must find a real estate agent to walk you through the process, even if you have a background in real estate and can do an in-depth market analysis of the property or properties you are considering. It is wise to have an agent’s input to help you make this decision.
Find an agent you can trust
When you are considering investing in West Vancouver luxury real estate, it’s critical to choose a real estate team that is knowledgeable and trustworthy.
Nobody understands Vancouver luxury real estate better than Amir Miri. Vancouver is currently ranked as one of the best places to live worldwide and continues to bring in clientele from around the globe. Amir Miri knows the Vancouver market in depth and has a network of connections in the city and across the world.
Reach out to Amir and let him navigate the complex yet lucrative endeavor on your behalf.