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3 TIPS FOR VALUING LUXURY HOMES

June 30, 2019

The endowment effect is for real.

Peoples’ irrational tendency to overvalue a thing once they take ownership of it has been studied and shown in ownership of coffee mugs, baseball cards, Final Four tickets, even apes and monkeys. In fact, out-of-the-ordinary items prompt especially significant cases of the endowment effect, according to BehavioralEconomics.com.

Of course, most of us probably don’t need an academic lesson to understand what is experientially seen all the time, in real estate markets all over the world: luxury owners consistently price their properties too high. To be sure, the term “luxury” is often used interchangeably with “premium,” aka the extra amount added onto the cost a good commands simply by being so desirable. But how is one to know where the line is between value-added and total ripoff?

We’re taking a look at a few practical ways to know how to assess the value of a luxury home and how to secure a good deal on a vacation home or investment property. After all, even luxury homes are only worth what someone is willing to pay.

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SPOTLIGHT: THE WOODLANDS/LAKE CONROE

May 25, 2019

Business continues to hum in the fourth-largest city in the United States, and the area a half-hour’s drive to the north offers both commuters and the hundreds of employees of recently arrived corporations plenty of luxury real estate steeped in upscale amenities and natural beauties.

LRI’s Quick Hits:

The Houston economy is projected to remain stable in the short- to mid-term, with continued job growth in healthcare and construction, and steady growth in oil and gas.
Residential build-out is expected in The Woodlands by 2022, but that will boost the market for townhomes and condos.

Warning Shots

Recent flooding and road congestion are correlated with recent surges in population and solutions are still being worked out.
Property taxes are high but tax reform talks are ongoing.

In a lot of ways, Texas is similar to Florida. Both impose no state income tax, both have thriving oil and gas markets, and both are among the top 10 fastest-growing states in the nation. While Florida is soaking up many of those abandoning high-tax states on the East Coast, Texas is pulling folks from California, Chicago, Colorado, and yes, also New York. However, in recent years, international migration has outstripped domestic, with locales such as China, India, and Latin America contributing.

Many of these new Texans are heading for Houston to take advantage of its strong jobs numbers and affordable costs of living. Many of them are young, single professionals content with apartment life in mid-town or the Galleria area, but home buying “in the loop” (the boundary created around the city by Interstate 610) is a different story. Homes in the city carry a premium and existing homes are commonly dated and in need of fixing up.

That’s where the suburban sprawl comes in. As Houston’s nexus pushes ever wider, areas such as Pearland and Sugar Land to the south, Katy to the west, and Spring, The Woodlands, and Conroe to the north have exploded in growth, as well. The latter is our “stomping grounds” here at LRI, and we know it well. A dollar–or a million dollars–goes much farther here and can be an ideal spot to invest in a vacation or investment property.

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THE 6 MOST COVETED LUXURY HOME FEATURES TODAY

May 6, 2019

When you’re shopping for a luxury home or building one yourself, you have the…well, luxury of seeing to it that the home meets not only your practical needs, but your splurge-tastic wants.

These are six of the latest and greatest features that discerning buyers around the world are clamoring for in their luxury homes.

Swanky Swimming Pools

It’s not an exaggeration to say that no vacation home in a sunny locale is complete without a swimming pool. For example, one analysis of MLS data by the Miami Herald found a whopping 87% of $2-$3 million homes in Miami Beach sold between September 2016 to September 2017 had pools. The percentage for two of the priciest Miami neighborhoods–Coral Gables and Coconut Grove–was 100%. But even in colder climates, an indoor pool is a popular choice with busy owners looking to get in a few laps before breakfast without going to the gym.

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WHAT IS A REALTORNEY?

April 21, 2019

When buying a luxury home, many people wonder whether it’s better to engage a real estate agent or a real estate lawyer. Each has particular value to add to you as a buyer, but what if you didn’t have to choose between the two?

If you’ll allow us to coin a phrase, what you’d have is a realtorney.

Our principals here at Lawyers Realty International are exactly that, practicing attorneys and licensed Realtors. We not only help you find the perfect investment or vacation property, we help you navigate the oftentimes complex waters of purchasing it.

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Markets

FLORIDA REMAINS TOP REAL ESTATE MARKET FOR FOREIGN BUYERS

April 5, 2019

We’ve written previously about Americans fleeing high-tax areas like New York and Connecticut for Florida. Many of these so-called “tax refugees” are CEOs and hedge fund managers who are buying up ultra-luxury real estate in the $10 million to $50 million range (and creating a run on private school spots in the process). But U.S. citizens aren’t the only ones scooping up property in the Sunshine State.

According to the National Association of Realtors’ latest Profile of International Residential Real Estate Activity in Florida, foreign buyers outlaid $22.9 billion for real estate in the state in 2018. This number was actually down from the previous year as a result of appreciated home values and a strong dollar making for poor exchange rates. Still, those headwinds were only enough to shave 5% from the total dollar amount, and all signs point to increased activity in 2019 and beyond, as we will show.

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ALL ABOUT U.S. IMMIGRANT INVESTOR VISAS

March 13, 2019

As the immigration debate rages on, foreign investors–and their cash–continue to be more than welcome in the USA. Today we’re talking investor visas.

LRI’s Quick Hits

For business travel, the B-1 Visa is most foreign real estate investors’ best bet.
Permanent residency is possible but involves investments of hundreds of thousands of dollars.
Citizens of many countries may not need any visa at all for short-term stays.

Warning Shots

Stringent requirements, possible system reforms, and lengthy wait times can make traveling here for business difficult.
Fraud is a rare but legitimate concern for foreigners investing in the U.S., making stateside representation before and during your visit a must.

The internet is a wonderful medium for exploring real estate investment opportunities all over the world, but there’s no substitute for witnessing a luxury property in person. If you’re not a U.S. citizen, when the time comes to conduct market research, meet with your top-notch team of attorney-realtors, or close a deal in the States, you’ll need to have already begun the process of applying for a visa.

There are several ways to travel to the United States as a real estate investor, and which option is best for you depends on your financial means and how long you need or want to stay. Let’s take a look at the avenues available:

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SPOTLIGHT: COSTA RICA GOLD COAST

February 25, 2019

After simmering for years, the Costa Rica real estate market looks primed to blow up and is one of Lawyers Realty International’s top targets. Read on for an in-depth look at the country’s North Pacific Coast, a hub for some of the finest luxury real estate investment properties in all of Costa Rica.

LRI’s Quick Hits:

Excellent investment areas are about a one-hour cab ride from the recently renovated international airport.
Foreigners can buy titled property on a tourist visa.
With planned infrastructure improvement projects, investment opportunities may present in underdeveloped areas where road access is currently limited.

Warning Shots

Knowledgeable legal representation is crucial as the vast majority of beachfront is known as “concession property” with special ownership restrictions.
Recent tax changes may narrow the profit margins for real estate transactions.

For at least the last twenty years, Costa Rica has been building its reputation as one of the best tourist destinations in the world. Here the adventurous can go zip-lining and stay in a tree-house, and those in need of R&R can have a spa day and eat organic cuisine. But it’s the natural beauties of this tropical paradise that are the biggest draw of all, rewarding visitors with white sand beaches, crystal blue waters, lush jungles, exotic wildlife, and soaring mountain ranges.

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THE BEST U.S. VACATION HOME MARKETS

February 9, 2019

When it comes to the vacation home market, not all states in the USA were created equal. Today we’re looking at the American locales delivering the best bang for the buck, and one famous metropolis that may have soured beyond some investors’ liking…

LRI’s Quick Hits

Florida is a top target for vacation home buyers in the U.S.
Beach/waterfront areas in general dominate the premier rankings.
Differences in local taxes can translate to huge savings.

Warning Shots

It’s a long game, not a get-rich-quick scheme.
Learn your history: what’s the area’s record for hurricanes, forest fires, droughts, etc.?

In recent months, two players in the real estate market–Realtor.com and Vacasa, one of the largest vacation rental managers in the U.S.–published their findings on the best places in the United States to buy a vacation home.

Vacasa’s list ranked the top 25 vacation rental markets using historical home sales, gross rental income less typical operating costs for the region, and cap rate. They didn’t set limits on a state’s appearances on the list, and as a result, Florida was the clear front-runner. The Sunshine State secured nine spots, good for more than one-third of the top 25, with well-known destinations like Key West, Kissimmee, Pensacola Beach, and Marathon getting the nod.

But it was lesser-known Forgotten Coast that took first prize, scoring a cap rate of 9.6% on median home prices of $336,900. That’s good enough for three times the return on a 30-year treasury bond.

Best Places to Flip a Vacation Home

Naturally, Realtor.com wanted to know which markets were best for selling a second home, not renting one out. Their list of the 10 most profitable markets to “chill out, then cash in” only considered cities where second homes constitute at least 12% of all properties, with individual states capped at two entries. They calculated annualized rates of return by comparing recent home sales prices to the prices of those homes the last time they were sold, going back to 2008.

The result? One quirky list. Florida did show up in a big way, securing its maximum two spots via Port St. Lucie and Key West, the only city to appear on both lists. A couple other big-name towns also made the cut: Hilo, Hawaii and Bend, Oregon.

But no-names like Aberdeen and Wenatchee in Washington and Brainerd, Minnesota found their way onto the list on the strength of their two-hour drives for second-home buyers in major nearby cities, namely Seattle and Minneapolis.

Taking the top slot was Traverse City, Michigan, with Midwestern tourists, investors, and retirees flocking back to the once-popular getaway spot to snap up lake-front properties since the local housing market bottomed out in the Great Recession. Realtor.com calculated the city as returning a 14% annualized return with median home prices of $315,000.

New York City: A Rotten Apple?

Then there’s the story of one popular tourist destination that is not providing solid returns of late.

In 2019, New York State and NYC’s tax policies have come under the spotlight as high-income citizens have been taking their business elsewhere. In February, Governor Andrew Cuomo acknowledged that the state collected $2.3 billion less than expected in income tax revenue as its wealthiest residents headed for second homes in Florida. Meanwhile, the brokers for billionaire investor Ken Griffin, Tal and Oren Alexander, explained on CNBC that the soaring taxes in New York City were driving luxury home buyers to…where else…Miami.

Just how bad is the tax picture in states like New York, now that a new law capping state tax deductions has gone into effect? According to Bloomberg, a New Yorker with a $10 million home and $10 million ordinary income would’ve saved $1,173,278 in total taxes by moving to Florida the day the law took effect!

Background Research is Key

It’s easy to fall in love with a vacation home or town, but you need to keep emotion out of the equation when picking a market to get into. As we discussed in a previous post, the average buyer holds onto a vacation home for six years…and a lot can happen in six years.

So here are some questions to ask to help you forecast the outlook for any vacation destination, pulled from the headlines in recent years:

Is there a history of natural disasters and do the current local and state governments figure to help or hinder this situation in the future? (See Southern California wildfires)
Is the local economy able to weather a national economic downturn? (See Las Vegas)
Are short-term vacation rentals even allowed? (See Miami Beach)
Is the region a 2-season tourism market or 4-season? (See Coeur d’Alene).

International Luxury Living—Simplified.

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Featured, Lifestyle, Travel

VIEW FROM 30,000 FEET — 2018 ANNUAL SURVEY

April 23, 2018

Luxury Portfolio International Trends

Trend 1 — Luxury buyers outnumber luxury sellers by a nearly 3 to 2 margin, resulting in historic low inventories of luxury properties in some hot markets. Even in cooler markets, sellers who have updated their properties are having the most success, occasionally aided by reduced pricing.

Trend 2 — The desire for greater privacy and perceived exclusivity is fueling an increasing number of “private” (non-public) sales listings. Top agents with experience in discretion and confidentiality are being selected to assist.

Trend 3 – Eco-friendly, energy efficient and security effective homes are desired as a reflection of the buyers’ values and lifestyles. Only a minority (around 1/3) think smart phones and internet connections should control/operate the home security system, reflecting a lack of trust in the privacy offered by smart phones or internet connectivity.

Trend 4 – The top 3 reasons for buying $1 million-plus homes are: a) improved quality of life; b) financial investment for portfolio; and c) change of scenery. Buyers see these purchases as a reflection of their personal achievement. Source: Global Luxury Real Estate Report 2017, Luxury Portfolio International

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Featured, Travel

BUYING A LUXURY HOME IN THE US

April 17, 2018

For many non-U.S. citizens, the purchase of a luxury home (or more than one) in certain places in the United States has become an important part of their overall investment portfolio, a strategic part of what we call “Protecting the Inheritance”. Here are our Bullets:

Good Luck Bullets

Available airline travel makes frequent use and even cross-border commuting a feasible option.
Luxury properties, purchased correctly, often provide opportunities for significant appreciation.
If the luxury home becomes your primary residence for two years, substantial tax savings upon the profits from sale are available, even for non-U.S. citizens. We recommend that a qualified tax professional become a part of the purchase team.
Purchase money loans are available for qualified individuals, our banking industry colleagues say. If needed, they can also be a part of the purchase team.
Texas is third in the nation for number of vacation homes[1], and cities like Houston, San Antonio, Dallas/Ft. Worth and Brownsville/South Padre Island have wide-ranging activities for family members of all ages.