If you plan on flipping a luxury home, expect to invest more than the usual cost for flipping a standard home. Buyer expectation dictates high-quality furnishings, generous space, and the perception of lavish living. For many luxury home flippers, the critical question is: How do I maximize profit for flipping such costly homes?
Those engaged in this high-stakes segment have several strategies to secure profit and avoid significant (or frequent) losses. If you plan to buy a luxury house in Beverly Hills for exactly this purpose, read about the advantages to expect and how to (almost always) guarantee a successful flip.
Advantage #1: Luxury homes aren’t true fixer-uppers
Despite sizable renovation costs, luxury home flips don’t require extensive structural rework. Owners tend to keep and sell well-maintained homes. And thanks to the constant upkeep, the timetable and contracting costs of flipping are cut. This allows flippers to focus on the planning and execution that go into creating a truly unique and appealing luxury home.
Though the entry into luxury home flipping is steep, acquiring a higher-quality property offsets the substantial upfront cost. This, in turn, contributes to easier marketing and faster closings with affluent buyers.
Advantage #2: The neighborhoods are great
One of the major advantages of luxury homes is their prime location. They’re located in neighborhoods where high-quality community amenities (stores, schools, parks, entertainment) are within easy reach.
The neighborhoods are also exclusive, populated by residents who value the finer things in life. Plus, residents here enjoy a good measure of privacy. For buyers looking for the perfect neighborhood, luxury homes usually meet those expectations – complete with majestic views.
Advantage #3: Little competition, many financing options
Pricing at a premium is a standard operating procedure for luxury homes. After all, buyers are getting a spacious home and the lifestyle that comes with it. At this price level, only a handful of buyers can afford the expense.
As a result, luxury home flippers have less competition to contend with. The smaller pool of competitors gives flippers more opportunities to negotiate with sellers. Moreover, this reduces the amount of time spent searching for properties.
And while the requirements for jumbo loans are more stringent for luxury homes, mortgage lenders will offer much lower interest rates for said loans than they would for conventional mortgages. Other financing options are also available. Experienced home flippers often take advantage of home equity loans and investment lines of credit to fund their luxury home projects.
Advantage #4: The payoff is lucrative
This advantage speaks for itself. Investors and real estate-savvy individuals are drawn to flipping luxury homes because the returns are enormous— a sign of money well spent. In a successful flip scenario, just one of any Beverly Hills mansions for sale acquired for $3 million can sell for double, translating to considerable profit even after renovation and closing costs are deducted.
If you have found yourself ready after assessing your finances and willingness to take on the risk, here are some common strategies to apply to your future home flipping project:
- Choose the most plain-looking house on the block. Then make it unique and increase its curb appeal. Some luxury homes in Beverly Hills can be found in neighborhoods where several houses are valued under the average or median of the area. Patiently seek out these properties because they give you a better possibility for large returns.
- Renovate with a sense of grandeur and neutrality. Luxury homebuyers pay great attention to detail. During renovation, consider the lighting options, flooring, appliances, and systems that will work best to exude the superior quality that comes with living in luxury. Choose from among midrange to premium brands and be careful not to work in too much of your personal taste. You want a neutral canvas onto which the buyer can project their own visions for the space.
- Be patient and buy lower-priced properties. Sticking to this strategy keeps costs down. Each time you flip a home, you will be operating at a negative until the home is sold and transferred to its new owner. If an undervalued property in a great area is put up for sale, put in an offer and do due diligence to assess its project-worthiness.
- Hire a contractor and an agent you can trust. You will be working with these professionals for a while because luxury home flips take a year to complete on average. Choose professionals with a background in luxury homes and have a track record for high-caliber work. Consider retaining them for your future projects. The results they deliver will influence how well and how fast you can flip homes. Building rapport will also make future flips run more smoothly and predictably.