Investing in a Mansion: Crazy or Crazy Smart?

Written by Posted On Thursday, 15 August 2019 10:47

Ever wonder why the rich and famous need to buy mansions all across the world? Why do they need to have luxury mansions in Las Vegas or on the Azure Coast if they know they won’t be spending more than a couple of weeks there? Isn’t it easier (and cheaper) to stay in a hotel? The answer is so simple and obvious — they’re investing in their future.

Stocks may come and go, industrial empires may crumble, but one thing that never fails is buying real estate. True, there’s no easy money, and every investment comes at a price (literally), so let’s take a look at a couple of real-life examples.

Sky Is the Limit

This goes both ways. On the one hand, house-flipping is extremely lucrative. The more expensive the mansion, the greater the profit. Orlando house-flipping rates jumped by 867% in one year, and Las Vegas and Phoenix also boasted a sharp increase. Millions can be earned in just one house redecoration project and there is a demand on the market. So, what’s the issue? 

Sometimes, the money you invest in redecoration equals the amount you paid for the place. What is more, it is no longer uncommon to turn to lenders for cash. However, as one of them readily states, not all of his loans are repaid successfully as some house-flippers have trouble finding a buyer. Despite all the odds and the booming market, investing in luxury real estate can turn out to be just one million-dollars’ worth flop.

Big LA Loss 

Even the experienced get it wrong from time to time. For instance, there’s the case of Arron Afflalo, an NBA star, who has already dabbled in selling estate. Still, his enormous four-bedroom five-bathrooms home was sold for less than he originally paid for it. Afflalo had his heart set on $5.5 million, but he ended up selling it for mere $3.46. This means he lost $331,000 with this transaction.

What is the big deal with these beautiful, over-the-top mansions in Las Vegas? Aren’t all luxury homes amazing enough to be sold? Not really. What extremely affluent buyers are looking for is perfection. They have a clear image in their head of what style they are going for and how much, if anything, they are to invest in the place. Indeed, big spenders are much more demanding and detailed-oriented than an average house hunter. Usually, they’re in no hurry and are used to finding what they want eventually — hence the high risk rates despite the ongoing demand.

In addition, the time for selling was completely wrong regarding the current market rates. As opposed to the previous year when homes were selling like hotcakes, only in June did we witness a negligible rise in the prices.

Learn From the Pros

Perhaps Afflalo could learn a thing or two from Ellen DeGeneres, who is rumored to excel at house redecorating. It is said she has just sold one of her homes for whopping $35 million.  What is even more praise worthy is how much she earned in this real estate business — a stunning sum of $19 million (!).

DeGeneres and her spouse Portia de Rossi seem to have quite a profitable hobby. They have already sold some real estate and reportedly earned quite a hefty sum along the way. What’s the secret? As told by DeGeneres, she never buys a house with the purpose of selling it, but they rather invest in their own home. At the end, it seems appealing to sell a fully furnished home to someone — and that’s exactly what mansion buyers are looking for in a place.

Final Words

So, what are you to do? Does it pay off to take a risk? It certainly does. Nevertheless, be very wary about the market and study the current situation and future forecast meticulously. Both profit and loss are guaranteed to be huge enough to cause either thrill or despair. Also, if you’re trying to dazzle prospective high-end buyers, think big and expensive, but also think small and pay attention to intricate details in order to create a world-class home.

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