Is it possible to break the stereotypes of the market and the real estate industry to get projects at a level where an investor can get at least 70-80% profit of the capital money. Not only it is is possible, but we are already doing it, applying in practice many principles and concepts that did not exist on the market before us. In this article, we will reveal how to achieve this and make it a reality in the luxury real estate. Unconventional ideas bring unconventional solutions. The great Einstein said, "There is always such an ignoramus who does not know that much in life cannot be achieved by definition. That's what makes discoveries."
Investment of Stereotypes
The market in Marbella has many offers, touting the purchase of real estate as the most profitable investment. As a rule, it is homes from 1.5 million and above in the segment of the so-called luxury real estate. All these proposals are accompanied by extensive reports of reputable real estate agencies with evidence that the property is only growing in value, and, therefore, investing money in a seaside homes is not only safe, but also extremely profitable.
All this is partly true, with one small exception. The market is guided by averages. There is nothing unique about it. The price of property depends on the economic situation on the market. In times of economic crisis, it always falls, then as the economy recovers, it rises.
These waves and circles on the water are endless. But we are not interested in this question. We are interested in the real estate when the value is immune to these fluctuations. We focus on those with the terms of growth in value without the influence of the market.
Look at what is left as the architectural heritage of the past and what has not only retained its value, but increased it many times over and their uniqueness is undeniable. Due to their uniqueness they are single offerings in the market. And that kind of the market is extremely small. Such properties are transferred from one owner to another and eventually stand the test of time. They are born as the historical objects of both residential and commercial real estate.
The conclusion suggests itself. If the market has an offer of such a level, then the investment is truly unique and a win-win. Offers can be counted on the fingers. Unique real estate is always in price and always in demand not only on the local market, but also on the global market. As a rule, such offers are the ones without wide advertisement. Information is distributed through exclusive channels. In order to understand how uniqueness is created, let's dwell on some explanations of what generally happens in the luxury real estate market. The market is ruled by stereotypes. It regulates everything and everyone! Luxury today is reinforced concrete boxes, glazed on all sides to enhance the views, in the style of the so-called "BOXES". The difference is only the number of square meters, location and finishing materials. The main thing is the views of their windows, cleanliness of forms and following today’s tendencies.
Most of the proposed property with prices of villas from a million and a half Euros is a luxury category. The market dictates those.
Following these stereotypes, what is the rate of return for developers in this sector? 15-20% maximum.
And what is the perspective for the buyer? What will happen to the value of the property in 10 years, and in 20 or 30 years? I'm not referring to the natural increase in the value due to inflation. I'm talking about the real value compared to the new properties on the market to appear in those time frames. Will it still be in the luxury category and will its value persist?
I don't think that will happen. In addition, decorating opportunities will diminish. Rising energy prices and the perfect storm that threatens the global economy as a whole are already making a lot of things simply unaffordable for the building and decorating industry. European factories are losing skills in the face of sharply declining demand and rising prices. This means that sooner or later, luxury will once again remain a minority fiefdom, and the world will slip even further into global industrial design.
Given such trends, we come to the following conclusion. We need to remain in a niche offering a true luxury, not fictitious stereotypes. This niche is narrow and difficult. It requires experience and talent, but it is the only one that gives investment opportunities that go beyond these stereotypes when we may create not only timeless real estate, but also provide investors with unthinkable rates of return in such projects: not 15-20%, but hundreds of percent.
New Investment Strategies to Get High Profit
One of our projects is the easiest one for an investor to understand. It does not require a huge investment, compared to other projects. It is a project that can really bring an investor a huge rate of return, due to the uniqueness of the property and the low cost of implementation.
One of the main parts of the budget is decor. To decor we refer the application of materials for facade finishing, interior design and decoration of landscape architectural forms. To create this real estate that falls into the category of uniqueness needs a lot of money. So, this cost effective principle is our know-how. We know exactly how to work with it to make it low.
But not only that!
All investors are always looking for the same thing. It's security for their investment and a high rate of return. How do you make that rate of return several times higher than industry norms? Our answer to that question is the following, and the most important thing here is to understand and feel this fundamentally different approach to determining the sale price.
We can't cut the cost of construction, we can get the cost of decor several times lower than the market, but the most important thing here is the selling price of the property. If we achieve such results, when the market price, in the eyes of the buyer, will be perceived as lower than the price he keeps in his head when looking at the property, we are the winners.
How we are going to do it
1. It's almost impossible to do it when buying an existing property. Market stereotypes will be in effect there. No matter what we do, we won't be able to achieve the main goal: to dramatically increase the rate of return by increasing the selling price. Such real estate will remain within the limits of market prices. Therefore, this option is not suitable.
2. It is possible to achieve the result only if we build such a unique property.
3. For the first time, we introduce the concept of "visual effect". What is it?
Let's look at an example. A standard villa, say 1,400 square meters total area, has three levels: the first floor, where all the main formal areas are (eg: living room, dining room, home study), the second floor (bedrooms) and the basement (wine room, indoor swimming pool and outbuildings).
At first glance, 1400 meters is not a small villa. But that's only on the plans and in the description. When we drive up, what do we see? We see 1/3 of the stated area in front of us. That's the perception. The house seems very compact visually. And now, we hear the price of 12 million Euros. Do we like it at first sight?
We realize that due to the location and the neighborhood, all prices are about that. In this case, the visuals of the villa gave us slight or not so much, but disappointment.
Now, let's imagine that we drive up to the same villa, but visually we see, all those 1400 meters on one level and, at the same time, the same 3 floors are remained. What is our perception? Wow! It can't be that there are only 1,400 meters, the property looks huge. The visual perception begins to justify the same price of 12 million. And now, it no longer seems so high.
But the sense of uniqueness doesn't come without another aspect. It is the perception of real estate from the inside. There are some laws at work there. We need to keep the attention and keep surprising, thereby justifying the price more and more.
What do we do next? The face of the house is its entrance hall. It is the first thing we see, it is the first impression we instantly draw conclusions and expect next to see something that can amaze us as much as the entrance hall.
Therefore, there is no need to economize on either space or decor. The task is to induce a slight sense of euphoria. Once we have it, we get more and more used to the price and find new excuses for it. It's pricey, but what a discharge!
What do we do next? We keep the principle of decorating, taking into account the "visual effect". However, other laws of interior design will work there. But the task is kept the same: keeping a constant sense of slight euphoria and create a WOW effect.
4.Unique Interiors and Architecture
It is impossible to create masterpieces while designing a property. Masterpieces require talent and a lot of time of working. And that is exactly the time we will not have. Otherwise, we will design and build for years and get lost the interest of the investor.
Therefore, everything should be prepared in advance. Here we are confronted with the taste preferences. Some people like one thing, others like another. The first step when working with an investor is that we must evoke a sense of slight euphoria in him, which means that we must have a good library of properties: architecture and interior design. We have it all ready and there are plenty to choose from: library of more than 800 unique designs, each of which is made with the objectives in mind.
5. Transforming a property into an art object. This is the most important stage of the work and is worth detailing here. The villa as an art object is so new concept on the market that the like simply does not exist yet.
Here it is appropriate to draw a match with contemporary art in general. When we go to a contemporary art gallery and see exhibits displaying there, the price tags with six zeros, does it make any special impression on us? I don't think so. Those who can afford it come in.
The contemporary art industry is all about commerce. They don't have time to wait for an artist to die getting the right prices for their work. Today the whole industry is an algorithm for pricing contemporary art.
I worked in Asia for many years creating ideas for villas and decor for the elite. The main lesson I learned was that one. The greatest value in real estate is how the floor and walls are decorated. In Asia, therefore, use the most of marble, onyx, mosaics and natural wood wall panels. When selling a house, the furniture does not matter. It is usually replaced by the new owner anyway, but everything else, the so-called inseparable decor (the walls and the floor) will remain. They create the value. The floors made of rare species of onyx or marble will always remain in value.
Therefore, uniqueness in real estate is its transforming it into an object of art. Art always costs money and never gets cheaper.
Here's an example.
Let's place a huge marble mosaic on the floor of the entrance hall, skillfully integrated into the interior. The resulting visual image is the Roman villa of Caesar's time in a modern version. It gives the impression of sophistication and inaccessibility to many.
Here is an art object of a market value of at least half a million Euros, not to mention what it does to the overall perception of the interior.
We got the interior of a million. Agree, in the total cost of the villa in all the same 12 million, it is a weighty argument.
Or, for example, the use of casting glass in the interior makes it extraordinary. If we order all this from the famous French company Lalique, the cost will easily approach a million.
However, the effect that such an approach is able to impress the buyer can justify the price of the villa. And still everything is for the same 12 million. It just can't be.
Or the same effect when using the blue glass in the pool area. These are all pieces of art from the very galleries that had unimaginable price tags.
There are plenty of examples like this in our library. Using a variety of materials, we can create art that lasting for generations. Even when the property is sold sooner or later, it is unlikely that such expensive works of art would be eliminated. That's why great interiors remain in history.
6.And finally, the last thing. To make it done, you must have such unique factories and artisans of the highest level. Otherwise, the goals are unattainable. This is another know-how that we use: to get décor and create works of contemporary art at a low cost of production. And that means that the budget for a unique property will be incommensurate with any budgets in the industry.
How do we do it?
We manufacture almost everything ourselves in Southeast Asia. We own some of the factories, some of the factories are Joint Venture of various kinds, and the rest are our trusted partners.
The unique thing about all this is that the factories of this level are hidden from the market. They cater to the elite and produce decoration for them, leaving most manufacturers in Europe far behind.
Of course, in order to get a high margin of profit, we need all of the components described above. But then, we manage the market value ourselves. Where there is no counterpart in the market, the price is not dictated by the market, but we dictate the market ourselves. Once again, I repeat my principle: unique real estate is always in price and always in demand.
In order to get such a unique opportunity an investment of 15 million would be required, then a rate of return of at least 70-80% takes place with a payback period of 2-3 years. However, this kind of profit is no exception. Projects are built so that the return is directly related to the initial investment. This is due to the level of real estate we really want to get.
Luxury World - Everything for Fine Interiors
Visit our LUXURY WORLD, a unique internet portal to see the most beautiful and rare models for interior design decoration: from bespoke models of furniture to the finest rugs and carpets with no match in the world. There are also a library of luxurious interior designs.