Guide to Luxury Real Estate Investing
Everyone is talking about real estate investing in today’s market. Look anywhere—podcasts, books, Instagram, even TikTok—and people are talking about all the different ways to make money in real estate. Everyone has their niche too—wholesaling, fix and flip, buy and hold, house hacking, syndications, land flipping, mobile homes, RV parks, syndications, etc. One niche market that has an entirely new playbook is the luxury real estate market. The luxury real estate market has evolved over the last decade from a market segment that few had access to, to a market that is multifaceted and has experienced increased exposure and activity.
Many may assume that luxury real estate investing offers only one or two avenues to make a return on your money when in fact the exact opposite is true. With high-end real estate, you can use your money for both enjoyment and profitable, stable returns. This is especially true in Park City, Utah. Park City, Utah has been so thoughtfully developed and has such a diverse economy that high-end real estate has consistently performed well over time.
If you’re looking to take your real estate investing to the next level, look no further than Park City, Utah. Park City has so much to offer throughout the year. The days when Park City was just a ski town from December to April are long gone. Park City has proven to be a destination of choice for millions of travelers year-round. World-class concerts, hiking, farmers’ markets, camping, shopping, dining, etc., create an unforgettable experience for tourists no matter the weather!
Before floating dollar signs in your head start clouding your judgment, sit down and take inventory of your goals with luxury real estate investing. There are several good questions to ask yourself but here are a few to help get you started:
> Type of asset— condo, townhome, house, larger home, etc?
> Will it be only for investment purposes, or will you want access for part of the year?
> Ideal Customer? Something right on the mountain or something further out?
> Goal return on investment for the asset?
> How active or passive of an investor do you want to be?
> What is your risk tolerance?
> What is your budget?
> How will you fund the deal?
> Will you be independent, or will you partner with another investor?
> What is your timeframe?
Anchoring your investment decision around your goals is a crucial step in high-end real estate investing. Understanding the type of asset, the ideal customer, and whether you will have access to the property are all important questions to ask yourself as you get started. Working with an experienced agent in the Park City market will be able to guide your investment decisions with greater clarity and focus once you nail down your goals.
Choosing the actual property for your high-end real estate investment is the prominent place to start. Park City has a diverse set of luxury real estate properties to offer—centrally-located condos, elegantly designed mountain houses, ranch-style estates, and everything in between! There’s an argument to be made for the easy to manage, low maintenance condos that are centrally located on the mountain and relatively easy to secure bookings throughout the year. And there is certainly an argument to be made for the scalability and high-dollar bookings from a large estate. Regardless of the size and style of the property here are a few questions to consider when evaluating luxury real estate in Park City:
> Age of the home
> HOA or any neighborhood fees
> Age of the major systems (roof, HVAC, hot water heater, etc.)
> Will the house need any remodeling?
> Does the home come furnished, or will it need to be furnished?
For many investors, the type of property they choose as an investment is something that feels natural. If thinking big is your MO, you’ll most naturally gravitate towards a more significant estate. If a compact centrally located condo is something you would choose to stay at on vacation to Park City, you’ll likely find yourself looking more towards that type of property. Of course, do your due diligence and understand what kinds of properties perform the best but don’t forget to trust your gut!
Location, Location, Location
It’s well known that real estate is all about location. In the luxury real estate market, this rule is especially true. If you’re looking to get top of the market returns for your high-end rental home, choosing an ideal location is everything. Selecting a location all depends on your goals for the asset. If you’re looking to make rental income from a condo or house from tourists coming for a week at a time to ski, the closer to one of the mountains you are the better. If your asset is geared more towards families who come and visit for months during the summer, then it may make more sense to get something further out from the mountain with more space.
Location is really where the expertise of a local agent comes in handy. Agents have their fingers on the pulse when it comes to the personality and characteristics of a particular neighborhood. You don’t want wild college kids on spring break in your rental home in a sleepy community off the mountain!
Park City has so many desirable neighborhoods to offer—Deer Crest, Empire Pass, Old Town, Park Meadows, Kimball Junction, Silver Springs, Lower Deer Valley, etc—that it ultimately comes down to what you are looking to achieve.
If part of your investing criteria is to add value to a property and then sell or hold it, there are plenty of options in Park City. Investors willing to invest the time, energy, and risk into managing a value-add project can potentially maximize cash flow and, ultimately, their return on their investment. Value-add projects can allow you to get something a little below your budget and utilize the savings to rehab and update the property. There are plenty of properties in Park City that can be rehabbed and updated into high-end, desirable properties. If you are looking to do a value-add project here are a few things to consider:
> Get a clear understanding of your purchase price budget
> Get a clear understanding of your rehab budget
> Decide how you are going to fund your rehab (cash, loan, etc).
> Make sure to get as much information upfront about what the property needs (Scope of Work)
> Analyze and carefully review comps to ensure your margins are worth the risk
> Decide who is going to do the rehab work (contractor, independent sub-contractors, yourself??).
Working with an agent to source and analyze a value-add property is highly recommended. An agent who knows the market well will most likely have access to off-market properties that you can potentially get at a discount before they go on the market. An experienced agent will also be able to help you evaluate your budget and exit/hold strategy for a value-add project.
As with any investment activity, research and due diligence are non-negotiable—especially when shelling out hundreds of thousands of dollars. Partnering with a real estate agent who understands and can articulate seasonal trends, comps, neighborhood analysis, and historic returns is arguably the most important step in investing. Some of the questions worth considering when looking to invest in Park City, Utah include:
> Seasonal hotspots
> “Slow” season and how long does it last
> Comps for rental prices
> Projected returns
> HOA fees
> Getting and closely reviewing a property inspection
The best due diligence is a balance of meticulous research and observation without overthinking the investment. By all means, take your time and make sure you have a good understanding of the asset, market, and investment but don’t get analysis paralysis!
Choosing the right property manager
If accurate and thoughtful due diligence is the most important precursor to a good investment, then choosing the right property manager for your investment is arguably the most critical factor in your investment going well post-close. If you are planning to rent out your Park City investment home throughout the year you will most likely have to partner with a property manager. A quality property manager will ensure that your investment property is well looked after to optimize rental income throughout the year. A couple of questions to consider when choosing a property manager:
> Property Management Fee
> Be sure to understand and agree on the property manager’s role (details such as cleaning, deposits, rent, maintenance requests, calendar management, etc.)
> Any “hidden fees” marketing, renewals, etc.
> Research their reviews in the area
Park City, Utah is a destination of choice for millions of visitors throughout the year and these visitors have a certain standard they expect when they travel here. Ensuring your guests have the most comfortable and enjoyable stay is fundamental in a successful Park City luxury real estate investment.
As mentioned, people have certain expectations when traveling to Park City. This is especially true for visitors who stay in luxury, best-in-class properties. Designing or choosing a home that is sophisticated, elegant, and subtly glamorous is the name of the game. While many can design every square inch of a luxury home perfectly, many do not. Working with an interior designer is an investment that pays for itself! There are dozens of interior designers who have mastered the ability to accentuate the natural beauty of the area in the home. Careful—they are so skilled that you may decide to move into the investment home yourself!! Here are a few tips for honing that true and test Park City style:
> Research other high-end properties and styles that are proven to be successful
> Partner with an interior designer who can capture the Park City personality in every room
> Dream big!
Speed is the name of the game in today’s real estate market. Inventory is so limited, and things move so fast in today’s market that if you don’t have some sort of “in” it’s almost impossible to succeed. Partnering with an agent who has insider knowledge, access to off-market properties, knowledge of motivated sellers, etc. is a game-changer as an investor. As a future investor in Park City, you’re competing against some of the most sophisticated and liquid investors worldwide, making it extremely difficult to succeed without someone on the ground helping you.
Jensen and Company is built on relationships and partnerships. We are rooted in the Park City community and have a long history of serving the luxury real estate market.
Jensen and Company is a premier luxury real estate team in Park City with over 30 years of experience. Founder Brad Jensen was asked to join the prestigious and elite International Luxury Alliance. The Alliance is an exclusive network of real estate professionals from key markets across the United States and Abroad. Access and involvement with the International Luxury Alliance position Brad and Jensen and Company strategically to help high-end investors and buyers.
At Jensen and Company, we live and breathe Park City. We are professionals, but we enjoy all that Park City offers, from recreation, dining, adventure, and scenic views.
Whether you are buying or selling—we are committed to providing a first-class experience. Over 30 years of relationships, a keen understanding of the market, and a dedication to customer service have made us a cornerstone in the Park City real estate market. Trust us with one of life’s most important decisions!