Improving Your Prowess as a Private Property Investor

Real estate has always been a significant avenue to building wealth. Investing in either residential or commercial property can yield stable cash flow,potential for growing your capital, and diversification, all of which are attractive to large portfolios. In addition, directly investing in real estate gives greater control of the risk profile, ownership structure, and business model. Furthermore, a property is something you can touch and experience, meaning that it is often a more emotional pursuit than stocks or bonds

First steps                        

The first step to investing successfully in property is to determine the nature of the project: is it only a financial investment or is it a lifestyle investment too? If it is a lifestyle investment, what personal or family goals should it support? Consider details such as restrictions of use as well as the potential for appreciation over a specific length of time.

If an investor is buying for financial reasons, is the investment based on income returns and yields or capital growth? It is critical to understand whether a property will be well positioned in the current and future rental markets in addition to factoring in operating costs and fees. Investors may require investments that will enhance residence or preferred immigration status.                    

Let’s Be Diverse

Following a diversified and balanced approach to investment is generally advisable. The advantage of this is that assets are spread out across markets, currencies, and economic cycles, so balancing potential risk. At present, ultra-high-net-worth-individuals (UHNWIs) from Germany are investing strongly in Barcelona, Lisbon, Madrid, and Mallorca, while UK-based UHNWIs have commercial property investments in Germany at the top of their list. Buyers in China prefer certain areas in Hong Kong due to their reputations, facilities, and locations. In Paris, international buyers from Italy and the USA currently dominate the market. An upswing in investors from the Middle East is also noticeable in the French capital.                      

Special tax regulations might also encourage individuals to invest in real estate. For instance, Italy introduced a special tax regime in 2017. It is intended to attract Italian and foreign investors who have resided outside the country for at least nine of the previous ten years to transfer their tax residence to Italy and pay a fixed amount of EUR 100,000, instead of the regular Italian income tax, on their income from foreign sources. In terms of taxation, it is important to know whether an investor plans to use a property as a second residence after relocating or rather proposes to rent it out. This decision, made at the time of purchase, will determine the taxation that applies during the period of ownership and at resale.                

Checklist: How to improve your prowess                        

So, how can you improve your prowess as a private property investor? Here are a few tips:

• Develop an investment strategy, taking time to research the property and area.

• Compare the property’s price to similar properties recently sold in the area.

• Be sure to understand the property’s location clearly (on a micro- and a macro-level) and its condition.

• Assess the annual running costs (including maintenance, taxes, and personnel).

• Find a reputable, experienced, and trustworthy real estate advisor. Investing in property is a very emotional business — so take time to find the right person who can also help to identify the best external service providers (banks, tax advisors, law firms) to deal with financing, fiscal optimization, and a host of other matters. 

From Coast to Island to Mountains                        

When weighing up where to invest in property, consider that international holiday hotspots offer financially rewarding opportunities. Owning luxury property in desirable holiday destinations is ideal for letting out during the high season when wealthy international clients are looking for exclusive accommodation. Profitable rentals depend above all on three factors: a very good location and infrastructure, first-class amenities, and a consistently high level of interest in the holiday region. 

One of the most attractive summer hotspots is the French Riviera. International buyers invest in houses and apartments, especially in the region around Cannes, Saint-Jean-Cap-Ferrat, and Saint-Tropez. Mallorca offers exclusive properties to UHNWIs seeking stunning locations in a secure environment, while luxury residences on Mykonos, Santorini, and Sardinia are also in high demand. This appetite is reflected in exceptional sale prices. Finally, bear in mind that buyers and investors with high public profiles frequently attract other wealthy clientele, adding value to a region.                        

When it comes to winter holiday favorites, Aspen, Courchevel, Gstaad, Kitzbühel, St. Moritz, and Vail rank among the most exclusive ski destinations worldwide. Luxury properties in these areas will always be sound investments because there are so few homes available. To ensure long-term potential growth in value, investors should look for properties in top locations. The highest resale value comes from properties with first-class architecture and features and spectacular panoramic views of water or mountain scenery.