You sure won’t bring home the big bucks with a mutual fund or a two-year CD. If you want to see a significant return on investment (ROI), it’s time to look to greener pastures.
We happen to know about an exciting investment option… flipping a luxury home.
Thousands of real estate investors buy fixer-upper houses in average or inexpensive neighborhoods to make a bit of a profit. But the real money in flipping houses is in the luxury market.
Below, we share some of the most important considerations to think about before buying a flip house to optimize your bottom line on this investment. Like you, we want your investment to be outrageously profitable.
What are the current luxury housing market trends?
It’s critical to know your market. At this time, with mortgage rates near record lows, it’s a wonderful incentive for people to invest in a home. The demand is high and inventory in many areas around the country is historically low.
This means there are vast swaths of real estate where it is a seller’s market. That’s great for investors! Buyers are desperate to move into bigger homes with all the amenities they need and competition is low.
People who are interested in buying a flipped house want a custom home that is turn-key ready. Buyers watch all the TV shows about luxury homes. Their expectations are quite high so you’ll want to deliver a product to impress.
11 strategies for flipping houses in the luxury home market.
Our favorite luxury home flipping tips include:
1. Find a realtor whose niche is luxury properties.
High-end properties require a bit of expertise. You want an agent who understands the local market and especially the local luxury market. Then you can find the best potential deals and avoid any nightmare scenarios.
2. Choose a stunning location.
The saying in real estate is true, “Location, location, location!” For waterfront properties, mountain homes, vacation rentals, and luxury homes—the location is more important than the building.
When filliping a luxury home, you can change the building but not the view or the amenities around the property.
3. Look for a good deal on a luxury home with solid construction.
Finding available homes can be challenging in this housing market so you may have to be patient to find a better-priced home. You definitely don’t want to invest in an endless “money pit.”
Be sure other homes in the area sell for a price close to the asking price you want to list the potential flip home for. You don’t want to create the most expensive home in the neighborhood if you want to get the best return on your investment.
Places to find a good deal on a luxury flip home purchase price:
- High-end property auction
- Luxury home for-sale-by-owner
- Foreclosure
4. Plan on a one-year time frame for a luxury house flip project.
Remember you will have significant carrying costs (holding costs) for luxury real estate. Because it often takes about twelve months from the time you buy the house, you’ll need to be prepared to have a hefty chunk of capital tied up in a loan payment for a bit.
The good news is that if you choose your property and expenses wisely, you can make a substantial profit, maybe even 40% on homes priced between $750,000 and $1 million.
5. Decide what your potential buyers will want in a high-end residential property.
Do you think your target audience is looking for a primary residence, family vacation home, or a luxury home rental?
For all luxury properties, outdoor kitchens, dining rooms, and sitting areas are very popular, as are high ceilings, timeless architectural details, and hardwood floors. If the home is on a lake, be sure to include an inviting boat dock.
If it will be a vacation rental or family vacation home, for example, you may want to include a game room with space for a pool table and pinball machines, a wide back porch or patio to accommodate a hot tub, and multiple master bedroom suites.
For a primary residence, focus more on a spectacular kitchen, a magazine-perfect master bathroom, a wet bar/dry bar, plenty of extra storage, and bonus living space. And don’t forget at least one amazing home office.
If the neighborhood is likely to attract families with children living at home, include some beautiful study spaces and a playroom. Because families will want this to be their forever home, consider universal design principles so people can enjoy the home for a lifetime.
6. Find a plain-looking house in the neighborhood and boost curb appeal.
Adding a few features like extra trim details and modern, high-end cement board siding can fix an older house up in a hurry. Don’t forget the landscaping when doing a luxury house flip.
Sprucing up the yard, hedges, and flower beds makes a huge difference in the initial wow-factor to a potential buyer.
7. Hire an interior designer and contractor you trust.
Especially if you plan to do multiple luxury home flips, it’s wise to develop a close relationship with a home designer and contractor.
Having a strong team with good communication makes the project go more smoothly and quickly. (Consider a design-build team for the greatest efficiency.) We all know—time is money on a house flip project.
8. Choose high-end finishes.
Don’t ever settle for standard anything in a luxury flip. Choose midrange to premium doors, fixtures, appliances, finishes, counters, floors, etc…
The details matter greatly in the luxury market because buyers have discriminating tastes. They expect and deserve the best in a luxury home.
9. Create a "wow" factor to impress buyers.
The right architect or home designer can help you transform a ho-hum house into something jaw-dropping.
Add soaring ceilings, dual master bedrooms, and magazine-worthy kitchens and master suites. Open up some walls and add a flowing spiral custom staircase.
Think about including grandeur yet keep things rather neutral so that the home can appeal to a wide audience.
10. Add extra space during the home renovation.
Luxury buyers appreciate extra living space in their homes and want to see every nook and cranny used ingeniously. Think bonus room, playroom/play space, reading nook, under-the-stairs wet bar, or a fully finished basement.
11. Plan for unexpected expenses.
As with any home remodel, leave yourself a cushion in case something unexpected happens so you won’t be thrown for a loop. To minimize nasty surprises, be sure to have the home inspected thoroughly before you buy.
Looking for a house designer to help with flipping a luxury home in the Columbia, SC area?
Phase One can help if you want to be a house flipper for luxury properties. We’d love to help you plan the design for your luxury home flip. We can act as your designers, a design-build team, or the design team and project manager for your design-bid-build project.
