The luxury condo market is in a tenuous state. Rents are rising and people don’t seem ready to move on these properties – but that might be good news for investors. For those looking to expand their real estate holdings, top apartments are priced to sell.
Built But Unbought
Since 2013, New York City’s luxury and “ultraluxury” housing market has been booming, at least in terms of construction. Unfortunately, the old saying, “build it and they will come,” didn’t exactly work here. Rather, a quarter of New York City luxury apartments built since 2013 are unsold. This is, at least in part, why rents are rising. Property owners need to raise the prices to cover their costs, but that may be keeping new tenants from moving into them. What’s more, it means that owners are more likely to want to offload these properties. Challenging market conditions represent the perfect time to negotiate a deal on an investment property.
New York City isn’t the only place struggling with an overload of properties. Miami is also struggling to sell luxury condos with international buyers who were once expected to purchase them. Miami relies heavily on international investment, especially with new changes to the EB-5 Visa program. While there’s enormous need for affordable housing across the country, there’s a real glut of luxury properties.
Time To Invest?
So how do you know if you should invest in real estate – specifically luxury real estate? Beyond having the financial resources, it’s important to evaluate the state of the market. These luxury properties aren’t attracting tenants right now, but can you turn them into impact investments? The benefit of investing in luxury real estate is that you don’t necessarily have to rely on long-term tenants. In fact, some of the most popular investment markets are the ones in major tourism cities. In these markets, investors have the luxury of targeting business travelers and wealthy tourists who want private, high-end accommodations.
As for which properties to buy, should you opt for slightly older properties – condos and apartments that went up closer to the 2013 boom – or new construction? New construction certainly still has its shine and is more likely to get people excited. Miami’s new condo construction includes beach views and locations directly on Biscayne Bay, in-building cinemas and golf simulators, and even bank vaults. Now is your opportunity to get in on the ground floor with new construction.
Another factor you should consider when selecting properties is that slightly older buildings may be more affordable. Buildings that have been hanging around semi-uninhabited since 2013 are more likely to offer a deal. It’s going to take some time for you to make these properties profitable, so you need that financial buffer.
It’s All About Scale
While investment groups and developers may be purchasing huge buildings or whole sections of cities, it’s important to remember that that isn’t the only investment model. One of the best things about investing is that there are so many models. What many experts recommend right now is that individual investors purchase single apartments in major cities and renting them to individuals or travelers – whatever their preference. What really matters, though, is that you have the time to promote the space and that, generally speaking, real estate, especially luxury real estate, is more reliable than the stock market when it comes to protecting your funds.
Overall, as part of long-term portfolio development, investing in luxury apartments is a good move, and now is a promising time to acquire especially high-end properties. As long as you’re willing to view these properties as long-term investments and allow yourself the time necessary to make them profitable, investing in luxury real estate while the market is in a lull can work to your advantage. The market always comes back to life eventually and you’ll be ready for business.
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