Luxury is synonymous with being expensive. And owning a luxury house is not something that anyone can do, even if you think you have the capacity to buy one. The reality is that managing a luxury property is more expensive than buying one.
Experiencing the privilege of having something luxurious under your name is just the beginning of more expenses you must shoulder if you want to keep or, better yet, increase the value of your property. That way, you can also gain something and earn income from your luxury investment.
But how much should you need to spend on maintenance and luxury property management? Here are essential things you should know as a real estate property manager.
Average Annual Maintenance Expense of Managing A Luxury Home
To give you a figure, a property worth above $1,000,000 has a monthly maintenance cost of $5,000 to $70,000, where the average price is equivalent to 5% of the total property value in a year.
The expenses may vary depending on the property type, design, personal preferences, and included amenities. Some property houses feature many rooms and larger yards. Others even have spas and pools.
To maintain all these, you need an additional workforce, contractors, and high-quality materials for regular and preventive maintenance.
But aside from all these, maintenance cost is not just something you should worry about. Other essential factors add up to the total cost of luxury property management.
Factors that Affect the Overall Cost of Luxury Houses
Before buying a luxury property, there is a breakdown or estimated cost of all the additional expenses. That way, you can get a glimpse of potential financial difficulties, and you can prepare yourself if you can shoulder them or if owning and managing a luxury house is a good move for your investment.
The main reason why luxury house management is expensive is because of the following factors:
When owning a property, you should have it insured to protect your investment from acts of nature such as earthquakes, hurricanes, tornadoes, and other disasters. It also has coverage for acts of man such as burglary, arson, and many other related activities.
Depending on your home insurance policy coverage, the price of each of the possessions you have in it and the total property value is the summary of the insurance cost or premium you need to pay.
Of course, luxury properties’ insurance premiums are higher than non-luxury ones. In addition, if your property value is several million dollars more expensive, it is a requirement that the insurance company will also need to contact your luxury real estate agent.
The average insurance cost for luxury homes, with a value of around $1,000,000, is $1,000 monthly. You can ask for a direct quotation from a luxury home insurance company to get an exact computation.
The mortgage is less of an issue for homeowners beyond wealthy enough to purchase luxury homes and other properties. But it is not the case for those who barely manage to qualify and afford loans for owning luxury homes. Paying off a mortgage can have a significant effect on their financial condition.
You can afford to purchase a luxury home with a minimum value of $1,000,000 if you loan half of the total amount you need. In this case, it is $500,000, making you pay a monthly mortgage rate of $5,000.
In a year, you need to spend over $60,000 to pay for the mortgage. Other additional expenses are still excluded from that amount. The cost may even get more expensive if you add the insurance cost for a private mortgage and other insurance expenses.
Property tax is another essential factor that adds to the expense of managing luxury houses. Thus, you should also allot your budget for it.
You need to know specific details on how much tax you need to pay when owning a luxury house.
For example, married homeowners who want to file jointly can lessen their mortgage interest on taxes by up to $750,000. If they’re going to file separately, they can pay only $375,000 on their first tax deduction.
Before anything else, when planning to purchase a luxury home, you need to learn about the property tax amount that you will have to pay. That way, you can add it up when calculating your expenses for managing a luxury house. You can also prepare yourself for future costs through the years of owning one.
To give you an idea, a one-million-dollar luxury house has an average annual property tax of $10,000. For some, this amount is manageable, but over time, as it adds up to other yearly costs you need for luxury house management, it can still cause financial difficulties. Thus, you should plan it out accordingly.
Upkeep or maintenance costs
As mentioned, maintenance or upkeep costs will also become a financial burden. These necessary maintenances can even cost you more than what you have expected to afford if you leave them unmanaged and neglected.
As a luxury property manager, you should have at least a 1% of the total property value as a budget for maintenance. That way, you can afford typical maintenance expenses such as cleaning, repairing, and buying new appliances or furniture.
Since it is also a lot of work to maintain a luxury property, especially if it has a lot of amenities like spas, swimming pools, and a wellness center, you may also need to allot a budget or groundskeeping expenses for hiring services or personnel who can do all these jobs for you.
Aside from the staff that will focus on cleaning and repairing, you may also want to hire expert personnel to inspect your property or maybe landscapists who can take care of the plants and the garden that makes your property look nice.
It is also convenient to have a real estate agent and tax inspector who will work for you, so you can ensure that everything’s accounted for and you will pay the correct amount you owe.
In every household, utility bills are the most common expenses you should take responsibility for. If it already costs too much for a typical household, how much more on a luxury home where more appliances require electric consumption?
With all these expenses in mind, you will realize that managing luxury houses is not an easy task. Thus, our luxury property management service can help you lessen your burden.
Need Help on Luxury Property Management?
As our name implies, Luxury Property Care offers the best services to help you manage your luxury properties with utmost care. We can provide you with extensive services such as rent collection, property marketing, tenant screening and management, property preparation and maintenance, emergency repairs, vendor management, repair supervision, processing permits and licenses, monthly reporting, bills payment, and lease renewals.