Investing in a luxury rental property can be a rewarding experience. This is especially true when considering that the high end of the rental market commands higher rent and greater profit.
“Luxury” investments, however, up the stakes. When buying a luxury rental property, much more is at stake, and one wrong move can negatively affect your reputation or your bottom line.
Owners with a high-end rental investment are usually under the impression that this investment can, with the right strategy, essentially take care of itself. However, there really is no turnkey rental property investment. The closest thing is to hire a rental property manager. If you get a good deal on an upscale Houston apartment complex, for example, it makes sense to hire a Houston, Texas, apartment property manager to help with vital landlord duties.
Here are the top five mistakes that high-end rental property investors make -- and how to avoid them.
One of the biggest mistakes is assuming an upscale property can just be managed like an average apartment or single-family rental property. It’s important to remember that luxury renters aren’t just renting space but also paying for an experience. They’re looking for upgraded levels of service and responsiveness, and they want something special rather than simply functional.
Luxury property owners who skimp on the upkeep or install basic fixtures will have a hard time attracting and retaining tenants who fit their target demographic.
Treat the property like a luxury brand. And spend money on quality finishes, regular landscape maintenance, and proactive maintenance and repairs. You should also consider offering high-end extras like smart home technology or housekeeping services. Communicate with tenants in a manner that would be in line with what they’d expect from a boutique hotel.
Luxury property is also highly emotional and driven by first impressions. It’s not rare to see an owner, after purchasing an expensive property, place it on the market with empty rooms and dim lighting. But here’s the thing. An expensive property will look like a budget property if it’s not properly staged and photographed.
A poor presentation can cause a vacancy period to drag on -- and you won’t make a penny from an unoccupied rental unit. Upscale renters won’t be content merely with walls, floors, and ceilings.
Consider investing in professional staging, real estate photography, and real estate videography. Emphasize lighting, textures, and points of interest, such as views or architecture. If your home is furnished, use professional, coordinated furnishings, not inferior ones that look like they were picked up from a garage sale.
Some luxury rental property owners only charge rates based on basic comparisons and square footage. This tends to create two problems -- neither of which is favorable to the property owner:
It’s best to look beyond comps. Research similar properties in the high end of the market, not the general rentals in the area. You should also consider hiring an appraiser or real estate agent with high-end expertise. A property manager with local area expertise is also a good investment.
There is a dangerous assumption that high-paying renters will be perfect tenants. Although it may be true that many high-paying tenants can be trusted with the keys to your rental units, there is no reason why incomes alone warrant skipping the screening process.
Luxury condominium buildings may attract individuals who want to project an unrealistic level of financial wherewithal. So, it’s important to hire a property manager experienced in conducting extensive screening processes that include credit checks, income checks, and background checks.
Upscale rental prospects may prioritize privacy and security above all other concerns. It would be a mistake to neglect this and have outdated security systems or poor-quality locks on doors and windows. Tenants paying rent for upscale units will expect more…much more.
Invest in state-of-the-art security, smart locks, exterior lighting, and access control. Also, be mindful of respecting tenants' privacy, giving prior notice before entering, and avoiding unnecessary access. Adding privacy options, such as gate control, hedging, and window treatments that allow sunlight but prevent people outside from seeing inside, will add value.
Owning a luxury rental property is about more than acquiring a costly piece of real estate. It’s also about fulfilling the expectations of tenants who expect the very best. Most common pitfalls arise from not realizing how particular luxury renters can be and how particular this niche is.
You can make things easier by teaming up with a property manager experienced in helping people who own upscale investment properties. That can translate into a better experience for you and your tenants.
