U.S. wealth is on the rise: the population of individuals with a net worth of more than $5 million grew by 17% from 2019–21, according to Coldwell Banker Global Luxury’s “A Look at Wealth” report. At the same time, wealth allocated to real estate surged to $3.6 trillion in 2021. With so many turning to real estate to diversify their investment portfolio, how does one cash in?
Thousands of Coldwell Banker Global Luxury specialists around the world are trusted advisors to clients looking to boost their real estate portfolio. I recently connected with four of them to find out their secrets. Jill Eber and Nathan Zeder are part of the renowned Jills Zeder Group in Miami who have far surpassed $1 billion in sales this year alone. Beverly Hills-based agent to the stars Joyce Rey caters to billionaires from around the world, having started the first U.S. company to specialize exclusively in multimillion-dollar homes in 1979, and Ed Feijo serves the titans of biotech, medicine, and universities in Cambridge, Massachusetts.
1. The Basics: Know Your Investment Goals
When first entering the investment market, Zeder encourages starting small: “Real estate is expensive, so make sure it’s something you’re comfortable doing.”
Eber says, before you get into the game, “know your ultimate objective when you choose to invest.” Consider what type of investment you want to make and prepare accordingly. Are you buying to flip, rent, or hold?
If your goal is to buy and rent out, be prepared to manage the property. Zeder and Eber emphasize that being a property owner is very different from flipping and selling; you must be prepared to deal with issues such as rental market changes, repairs, and breakdowns. Properties require maintenance, and if you’re not handy yourself, have a team of people there to help.
If you’re looking to flip, start small because expenses add up quickly. You may not be as concerned about inspections if the place is going to be torn down, but be aware of the potential costs.
If you plan to purchase a secondary home to hold and later sell, know that these purchases require more due diligence on the front end of the transaction, and an inspection is more vital. This is just one of the many areas where having an agent as a trusted advisor during the transaction is key.
2. Location, Location…Return on Investment
Feijo suggests prioritizing location if you plan to invest in a rental property; ensure it is always saleable and located where tenants will want to live.
Often, buying a property comes down to ROI. “Never give up a good opportunity, because you’ll never regret a good purchase,” Feijo advises.
Rey notes that the most sophisticated investors she’s worked with look for prime locations and quality construction, which makes her market exceptionally strong.
Eber concurs that desirable locations, waterfront views, and the feel of a home are most important to buyers. Proximity to schools, if that is desired, and walkability are also key factors. The investor looks at all of those elements, but the bottom line on the investment is most important, and location will always affect the ROI.
3. Prepare for the Luxury Migration
This has been the year of movement, so experts suggest being flexible when considering where to invest.
In California, Rey has seen a huge migration to the suburbs as people look for more land. Although she’s seen movement to other states, people have kept their California homes and added secondary homes in other states to their portfolios for tax reasons. As for where people are coming from, the market continues to be largely domestic, but Rey has started to see global buyers again. On an annual basis, the luxury market is composed of 20–25% foreign money.
Like most cities across the U.S., Cambridge is experiencing tight inventory. It’s a great secondary city, outside of Boston, where people feel they get more for their money. Feijo notes that he’s seen a lot of younger families moving to the area with buyers being mostly domestic. He sees the occasional international buyers whose children attend nearby universities such as Harvard or MIT.
Miami has always been a hotspot for investors for its multicultural, welcoming nature; unmatched location; and international stature. Zeder says there’s been a monumental uptick in movement from other parts of the country, including California and the Northeast, perhaps the most they’ve seen. He believes that as travel restrictions lift, there will be an influx of international buyers.
We’re seeing a wave of those choosing to invest in real estate rather than in the stock market, due to decreased volatility and overall stability. Additionally, Zeder’s international clients often invest in U.S. real estate because they see it as potentially a “safer bet” in the short and long term.
4. Find a Great Partner
Navigating the nuances of real estate investments can be difficult, so finding the right real estate expert to help guide you through the process is the final must.
With our expansive network of more than 90,000 knowledgeable agents, it’s easy. “Pick a great broker at Coldwell Banker,” Rey says. “Get professional advice and guidance from a knowledgeable real estate agent that you trust implicitly.”
If you’re ready to start investing, visit https://www.coldwellbanker.com/about.
Those named here are not licensed financial advisors. Seek the guidance of a licensed financial advisor when making personal finance decisions.
Michael Altneu is the vice president of luxury for Coldwell Banker Global Luxury.