Luxury rentals have recently become popular among business travelers, vacationers, and more. If you own a luxury property and you’re wondering what you can do with it, you may consider converting it into a rental property, whether as a short-term or long-term rental. Below, we break down the reasons why, as well as share a few tips to help you get started.
Definition of a Luxury Property
Luxury real estate encompasses properties that are in a premium location, have a massive floor plan, have luxe amenities, and more.
Contrary to popular belief, luxury real estate is not limited to properties with a steep price. Buyers who wish to invest in a luxury home can spend anywhere between a few million dollars to $100 million, depending on local property prices. For example, if you were to spend $1 million on an L.A. County property, it probably wouldn’t be considered luxury as the median home price is $795,000. However, a property of the same price may be considered luxury if it were the most expensive property in a less populated place.
Another factor to consider is whether or not the property features panoramic views of the river, sea, countryside, or even the city. Architecture also sets luxury properties apart from “regular” properties, as the former tends to use more premium materials and boasts bespoke designs.
Benefits of Renting Out a Luxury Property
Let’s take a look at the reasons why you may want to rent out a luxury property:
Real Estate Is Less Risky
In general, real estate investments are less risky than other investments like stocks. The reason for this is that the real estate market rarely moves when there are movements within the stocks and bonds market. In other words, real estate investments are not that volatile. They’re more stable and reliable, making them safer for investors who worry that property prices can drop at any point in time.
There’s a lot you can do with a luxury property. For example, if your property is in a prime location, you can easily find plenty of tenants who’ll want to rent such a picture-perfect place. You can even leverage the property’s exclusivity by turning it into a venue for big events such as weddings. While you won’t be able to attract all tenants, you will be able to attract a particular breed of tenants who’ll be willing to pay the premium price tag.
Control Over Your Investment
When you invest in real estate, you will have complete control over it. You can set the rental rate, choose the property improvements, and even decide when and when not to put it up for rent. If you intend to sell it in the future, you’re free to do that, too. You’ll be able to tailor your property management according to your goals.
High Resale Value
By default, properties in a prime location, are exclusive, are in proximity to amenities, etc. will be able to outperform other types of investments in terms of ROI. While it may be impacted by the market, the movement of the value of a luxury property will typically always be upward. That is, of course, if you stay on top of property upkeep – this can be done by working with a property management company.
When you invest in real estate – even luxury real estate – you’ll be able to benefit from a variety of tax deductions. Tax deductions allow you to add more money to your cash flow or, at the very least, lower your expenditures. You may want to consult a property tax professional to determine what exact tax incentives are available to you.
Tips on Managing a Luxury Rental
Now that you know what the pros of luxury property rentals are, let’s get into how to manage them.
Highlight High-End Features
Luxury tenants won’t be impressed by the number of bedrooms, bathrooms, etc. Remember that you’ll be renting to a unique “breed” of tenants. That said, think about what will get them to want to rent your property in particular. Highlight the high-end features such as the indoor pool, spa, sauna, and so on. As a rule of thumb, its luxury features should be front and center because it is, after all, a luxury home.
Provide Luxury Amenities
Ask yourself, “What additions would make their stay feel more luxurious?”. This applies particularly to vacation rentals. Consider providing your tenants with toiletries from Le Labo, stocking up the fridge with organic foods, and so on.
Partner With Vetted Vendors
A luxury property deserves more than ordinary maintenance – it deserves luxury maintenance services. Chances are, your property contains expensive pieces of furniture, art, etc. that require a specific type of care. Any maintenance company won’t know how to care for these exquisite items, which is precisely why you need to work with a luxury maintenance company. They’ll know what cleaner to use for certain furniture, how to safely clean art, what scents to use, and so on. And if your property uses high-tech tools, they’ll know how to work these, too.
Consult Local Experts
Unless you’re an experienced real estate investor, you may want to work with a real estate expert in the market where you want to invest. While you can always study rental-related laws on your own, it can be time-consuming, and that time may be better spent elsewhere.
Work With a Real Estate Lawyer
Consult a real estate lawyer who can assist you when it comes to landlord-tenant laws, specifically the ones that apply to luxury properties. A real estate lawyer can ensure that your property is compliant with local laws, as well as draft a fool-proof lease for you.
The Bottom Line
Renting out a luxury property can be extremely lucrative, but if you’ll be entering uncharted waters, it’s best to partner with a property management company. Remember that there’s more to manage, so you’re going to need all the help you can get.
The experts at Luxury Property Care are here to provide you with all of the luxury maintenance services that your property requires. Contact us at (561) 944 – 2992 or fill out our contact form for more information.