Buying a home is one of the most important financial decisions you’ll make in life. Naturally, many buyers dream of living in a luxury home with all of the perks—a chef’s kitchen, a wine cellar, and a Pinterest-worthy master bath, just to name a few.
But the reality of homeownership is much different than renting. In addition to the purchase price of your new residence, there are other costs to consider, including property taxes, insurance, and home repair.
Other expenses might include association fees, renovation costs, and emergency repairs.
Before you run out and buy the biggest, fanciest house on the block, take a look at the pros and cons and carefully weigh your decision. Your long-term financial health could depend on it.
Here’s what you need to know about buying a luxury home:
The pros of buying a luxury home
Real estate agents agree there are definite pluses to purchasing a luxury home. According to REP calgary homes, pros include: “The value of the home and community are already established, most of the appliances are included in the sale, and these homes have more character and bigger lots.”
Other pros include:
- Extras: High-end neighborhoods, condominiums and communities usually include extras you won’t find in a typical home purchase. If you’re looking for a community pool, in-home maintenance, or other special amenities, these are often included in your Association dues. Also, the home itself will likely have some unique characteristics (think elevators, large garages, mother-in-law suites).
- High resale value: If you plan on eventually selling, the buying cycle can be long but you’ll likely see a better return on your investment. Of course, this is subject to market conditions and the condition of the home when you sell it.
Tips for luxury real estate buyers
If you think luxury real estate is the way to go, here are a couple of buying tips from the pros:
- Find a local expert: Many real estate agents working in the luxury market have a wealth of information when it comes to specific neighborhoods, condominiums and new constructions. Work closely with your buyer’s agent to find the right property for you.
- Consider the total cost of ownership: Prepare yourself for hidden costs like emergency maintenance. It’s best to look beyond your mortgage payment and be sure your financial situation will allow you to prepare for the total cost of ownership. Mortgage professionals are a great resource to help ensure you are not taking on an unnecessary amount of financial risk.
- Employ an attorney when necessary: While real estate agents and mortgage companies are helpful, properties like condos and coops often involve a larger volume of documents and additional monthly or yearly fees. Running these legal documents by your attorney for review prior to closing can be helpful.
The cons of buying luxury properties
It’s important to understand that luxury real estate purchases aren’t always ideal. Depending on the age of the home, maintenance and repairs can really add up. Plus, you’ll likely pay a lot more for homeowner’s insurance.
Many financial experts warn that given the volatile nature of the real estate market, buying less house than you can afford is a smart move.
Warren Buffet is often touted as the gold standard: despite his financial genius, he still lives in the Nebraska home he purchased in 1958 for $31,500. He made headlines last year when he struggled to sell his CA vacation home, but that was an investment and not a residence..
Many times, would-be homeowners get swept up in the adrenaline rush of the sale. These are important decisions, and leading with your emotions can cause real financial distress once you’ve settled into your new digs.