Luxury properties aren’t cheap, but they can be a profitable investment if you play the game correctly. Depending on the location and current market, it might take a little longer than standard properties, but it’s worth the wait because the rewards are much higher.
If you’ve bought some luxury rental property and you’re looking for ways to make it more profitable, try using these tips.
1. Hire a property manager
Many investment property owners attempt to handle their rentals on their own, but it doesn’t take long to see why this works against you. If you’re buying luxury rentals, you’re probably managing more than one property, in which case, you need as much free time as possible to pursue additional investment opportunities. That’s not possible when you’re the landlord. Being the landlord actually makes you less profitable because you’re spending time doing tasks that you could easily hire out.
Having a property manager handle your tenants and properties will help you maximize profitability in several ways.
- You’ll avoid costly legal mistakes. You can’t afford to violate the ADA, Fair Housing Act, or evict someone the wrong way. A property manager will know how to handle tenant issues legally.
- You’ll have more time to yourself. You won’t be bogged down collecting rent and answering emergency calls at 3 am. This will give you more time to pursue additional investments. You also won’t have to manage your own bills if you choose a company like Crown Luxury. Many property management companies will handle your finances and send you a financial statement every month and at the end of the year.
- Property managers have systems. It’s easier for an established business to run things smoothly because they have tried and true systems. They’ll handle everything from rent collection and deposit to marketing and legal compliance.
- Better tenants. Do you really want to spend your time trying to determine which tenant is the best fit? A property manager will know exactly what to look for to get you the best tenants possible.
These are just some of the ways property management benefits you as an investor. It’s the best option if you wish to spend your time on other profitable pursuits.
2. Focus on location
Location always matters in real estate, but it’s especially important when you’re dealing with luxury properties. Before buying a property, make sure it’s located in an area where people want to live. It doesn’t have to be a beach town or a popular retirement town. You can find luxury properties all over the place, in the city, the country, and even in the forest.
You might even find that some people want luxury properties in the middle of nowhere because it offers an extra layer of security and privacy. However, be wary of expensive properties in the middle of neighborhoods that are run down. This will be a deterrent for many renters who want to live in an environment that matches the luxury of their home.
For example, they want to see nice lawns, beautiful architecture, and clean yards as they drive around. They don’t want to see piles of junk, broken sidewalks, potholes in the road, and overgrown bushes.
3. Go big
The size of a luxury rental property will determine the amount of profit you can generate. Bigger properties generate higher rental income. Although size isn’t the only thing that matters, it is a major contributing factor.
While square footage is important, it’s the amenities that make size a big deal. Larger properties tend to have a tennis court, a swimming pool, and other desirable features not found in standard homes. It helps to acquire properties that already have these amenities, but it can also be beneficial to add them after you buy a property. Just be aware that having a pool comes with more liability, so be prepared to get extra insurance in that case.
4. Focus on long-term renters
You’ll make the most money when you can maintain tenants long-term. Your ideal tenant for a luxury property is someone with a high income who wants to stay in the same place for a long time. Thankfully, there are more high-income renters today than ever before.
You need someone who will take care of your property. Most high-income earners are more responsible than other tenants, but don’t skip the screening process. Verify rental history and check all references regardless of how you feel about a prospective tenant.
It’s okay if it takes a little longer to find your ideal long-term tenant. Sure, if your property remains vacant while you search, you’ll miss out on a little bit of rent. However, getting the right tenant is worth the cost.
5. Consider renting property as a venue
The residential luxury property market is an obvious source of profit, but there’s another largely overlooked opportunity: luxury venues.
Luxury properties are available in all kinds of architectural designs, shapes, and sizes. Some properties, depending on their location, make perfect venues for weddings and other private events. Your property won’t be rented year-round, but the potential for profitability is huge. In addition to renting the space as a venue, you can offer additional, personalized services.
6. Rent your luxury property as a vacation home
Vacation rentals are another profitable option for your luxury property. When people take time off work to go on vacation, they want to feel luxurious and pampered. However, not everyone enjoys staying at a resort with crowds of people.
Renting your property as a short-term vacation rental is a good way to make your investment profitable, provided you can offset your expenses when it’s not occupied.
Is luxury property the right investment for you?
Many real estate investors have found luxury properties to be a lucrative investment. Whether they’re used as a traditional rental, a vacation home, or a venue, the potential for profit is higher than a traditional rental property.
If you can afford to invest in a luxury property, you have every reason to jump on the opportunity.