Owning a luxury property – just the thought of it makes you feel rich, doesn’t it? Of course, owning luxury real estate is indeed a matter of pride. It gives you a status that only a small percentage of the population has.
However, for many, especially those who invest in the real estate market, such properties are not just about upper-class, luxury living. Owning luxury villas or properties is an investment for them and a way to make more money.
Think about it – in prime real estate locations across the US, the median sale price of luxury single-family homes is $4.8 million. Nationwide, the median price of luxury homes hit $1.2 million during the same period. This saw prices within the country’s luxury real estate market hit an all-time record.
Hence, those who can afford to invest in such properties are actually buying them. Most of them see these properties as lucrative investment opportunities.
On a global scale, the scenario is somewhat similar. Luxury property prices worldwide are increasing every year, and that begs the question – will it be worth buying a luxury property abroad? Whether for investment or personal usage reasons, should you actually go out of the US to invest in luxury properties?
The answer is a definitive yes, but why? Let’s find out.
Diversification of Investment Portfolio
Real estate, especially luxury properties, is often seen as a stable investment. However, if you’re putting all your eggs in one basket, particularly within your country's economy, it might not be the wisest strategy.
Just earlier this year, experts were predicting that the US will face a recession in 2024. While that fear is now being downplayed, the risk of recession was there. Had all your luxury properties been in the US, you could’ve been a victim of this economic calamity had it actually happened.
When you bring a bit of diversification to your investment portfolio, you’re basically adding a level of security to it. Investing in international luxury properties is a great way to bring such diversification.
In a way, you’re spreading your risk across different markets, that too in different regions. This can act as a hedge against economic downturns in the US, protecting your overall wealth.
Besides, global markets can offer more substantial growth opportunities, especially in rapidly developing areas where luxury properties are in high demand.
Potential for Higher Returns
In certain global markets, the potential for higher returns on luxury properties can be much more significant than within the US.
Take the case of Riviera Maya in Mexico for instance. According to Raíces y Propiedades, this area has many luxury residences available as vacation rentals. Given that the region is witnessing a boom in tourism, these luxury home rentals are more or less in demand throughout the year.
Now, if you invest in real estate in Riviera Maya, you can then turn the property into a luxury vacation rental. Beachfront condos are also popular in the region, so you might consider investing in those too. As you later rent out these properties, you can earn a sizable amount of money as rent every year.
The allure of these destinations is not just their beauty or cultural significance; it's also the steady appreciation of real estate values. Hence, you have the chance to gain substantial profits if you buy at the right time.
Access to a Prestigious Lifestyle
Let's not forget that luxury property isn't just about the numbers. There's an undeniable appeal to owning a second home in an exotic location that allows you to immerse yourself in a different lifestyle.
Imagine sipping fine wine in your private villa in Tuscany or enjoying the sunset from your beachfront estate in Riviera Maya. These experiences are invaluable, and they offer a lifestyle upgrade that can't be measured in dollars alone.
For those who prioritize luxury living, buying a property abroad can provide unparalleled access to some of the world's most desirable locations.
Considerations for Long-Term Value
While buying luxury property abroad can be incredibly rewarding, it's essential to consider the long-term value. This isn't just about financial returns but also about the property's usefulness to you over time.
Will you be able to visit the location frequently? Does the country have favorable tax laws for foreign property owners? What about the political stability and the ease of doing business in that country?
These are all critical factors that can influence the long-term value of your investment. A property in a stable, thriving country with good legal protections for foreign investors is far more likely to increase in value over time.
Having said all this, it’s evident that buying a luxury property abroad is more than just about the status. It’s a strategic investment decision that can offer diversification, potential for higher returns, and access to a prestigious lifestyle.
However, like any significant investment, investing in luxury properties abroad requires careful consideration and thorough research.
