The first thing that comes to mind when many of us consider the words “luxury real estate”, are the homes we only ever encounter on a reality TV series. Fortunately, the ownership of such homes is not only limited to those born with the perfect combination of an influential last name and striking looks.
Meet Brett Harrison, the CEO of California based Socal Luxury Real Estate. With extensive experience in the real estate business, we had a chat with him about what it takes to make it big as a young investor in real estate.
What are the components of a great investment from a financial perspective when it comes to real estate?
The first and most commonly known is the location. But more important, it’s the value that you get for what you’re investing. Most of my clients would like to buy a brand new house. But I like to steer my clients towards buying a house that would need a little bit of work or a distressed deal. Even if it was somebody looking to buy their first house. In fact, especially a first time home buyer. I would absolutely suggest that they find a house that needs work, or is a distressed property. Try to find a really good bargain. Maybe part of a divorce, or a foreclosure. Because that way, they can go in there refurbish the house a little and drastically increase the value. Making really great financial returns on the house the day that they move in. Furthermore, using this approach you can make the house your own. And as a pure investor you can make so much money by applying it.
Buying a home is extremely exciting for many. Especially if it’s your first purchase. But it can quickly turn sour if you don’t do the right research. What will most agents NOT tell you when selling you a home that people really need to look out for?
Well it’s not that they don’t tell you on purpose. It’s usually because they don’t understand the market or don’t have the right facts. Due to this, they won’t point you in the right direction. When you are looking for an agent specifically, get someone who is really knowledgeable. Their knowledge base should extend beyond just the area. They should also be well informed about the home and the structure of the home. For example, what I see a lot of is that there could be a foundation problem, the house may be slipping a little bit. And those are major expenses that can destroy your home ownership in the first couple of months. Therefore your agent should have deep knowledge of the structure, how the house was built and what the situation is within the home. They should know all of this prior to even showing you the home.
But how do I know if I have the right agent? What questions should I be asking to find out if this is the right agent for me?
You should seek to know if the agent understands the following:
The housing market
The area, its problems and its local districts
The environmental aspects of the area, such as the movement of soil
The house, its history and its structure
You have to really drill down and not be afraid to ask questions that dig out the specifics. Also try to get an agent that’s firm since your strong emotions and lack of expertise may cause you to make bad decisions even if you had a good agent. Ideally, your agent should be more interested in getting you the best financial deal, than in making friends with you.
Why would I invest in the luxury real estate market over ordinary real estate?
With all real estate it’s really as simple as finding a distressed deal. It doesn’t matter how much you have in the bank, or how much you are worth. It does not even matter how much the house costs. You absolutely make money if you can buy it right. And that’s the perspective you need to keep. When I first started out for instance, I took a $1 million house. However, I found one that also cost $1 million, but with a little bit of work, it would be worth $2 million. So that’s what you have to look for. You can’t be scared of cost. Those are just numbers in my opinion. It really depends on what it could be worth after you’ve done the work.
If you say that it doesn’t matter how much it costs, how can I get it financed? And would you as an agent assist me in the financing process?
Absolutely. There are all sorts of financing mechanisms. There’s the world of professionals, hard money, private money. Almost every deal I do I introduce my clients to lenders.
Do you also introduce your international/ non-American clients? I presume you would have a lot.
Absolutely. Some of my international buyers have never even been here before. We connect them with the Escrow and other resources. It’s a big part of our business.
Lastly what is the best advice that you can give to a young ambitious professional considering buying a property right now (or several)?
Find the right deal where you will have equity (ownership) immediately when you close that deal. That’s my number one suggestion. Furthermore, do your research. Make sure that you uncover every stone there is about the house. Go to the city where the house is, talk to the residents, ask them about the home and its related problems. Those are the things that will save you a great deal of time and money in repairs. That’s the biggest mistake I made when I started. I rushed into a house without doing the correct research. And after buying it, I had to spend a lot of money fixing it and that completely ruined my margins. Lastly, manage your time and your budget wisely because it can get out of hand very quickly.