The article deals with the most unusual projects of construction of private villas as an investment. The basis is taken as a complex solution for the creation of unique projects in terms of architecture, interior design and landscape. All the described projects have no analogue in the market by two criteria: the level of design and profitability of the investment project.
Real Estate Investment - High Return
On average, the level of profitability in this area of business (construction of private villas) is in the range of 15-20% of invested capital. If we take such a segment as the construction of hotels, this is added to a long payback period of such facilities: 10-15 years, which in terms of annual income is much less than the construction of private villas. However, in the long run, it will provide reliable preservation of capital and profits for many years, which in aggregate becomes interesting to many investors all the same.
I worked for many years in China in this area of business. The concept of real estate business itself is understood very differently there than it is in Europe. The large companies involved in this business are developers, builders and sales agencies at the same time. They also employ interior designers in addition to architects. 25 years in this market has brought great experience and understanding of how the price of real estate sold and how profitable an investment in this business may be.
Without going into details of the specifics of the Asian market, I will tell you only one thing. There is a completely different approach to everything. Profitability of 15%-20% will never interest investors. Despite tremendous competition, many companies have their niche in the market. Working shoulder-to-shoulder with Asians like Green City, Star River, I have come across how they value and create property values. Many of the techniques can and should be transferred to the European market, where they can work fine.
To summarize and ask myself whether it is possible to go beyond the 15-20% profitability standards, my answer is affirmative. I've already written quite a bit about this. More curious readers can go back to the article "What is the most profitable investment in real estate".
I will still briefly dwell on it, so that in the future, moving on to a conversation about conceptual design specifically, it would become clearer why the Investment Club appeals to non-standard solutions, which the market either does not use much or does not use at all. And then, it will become clearer why and how realistic it is to get profitability several times higher than the market average. Is it possible to achieve 100%, for example. My answer is not only possible, but necessary. A lot of things will be required for this, but anything is possible. If I didn't have experience in Asia, I would never have believed it was even possible, and not a matter of our sick imagination.
Top Real Estate Investment Strategies
The basis of the market value of all luxury projects are as follows:
* The uniqueness of the idea. It is desirable that the market has no analogues of such a project. The more interesting the concept of the project is, the better. With no match on the market, such an important indicator as property location is left behind.
It all depends on what we are going to build.
A perfect example of this is one of the most famous settlements in Europe, "La Zagaletta" in Spain in the municipality of Benahavis, Andalusia. Looking into the history of its creation, we see that in the past, at the turn of the 70-80s of the last century, it was a place no one knew about.
Brief history Of La Zagaleta
Adnan Mohamed Khashoggi, born 25th of July 1935, bought La Zagaleta, at the time called La Baraka (Happiness) in 1973.
La Zagaleta, along with other hectares of land, was originally part of the land originally owned by Thierry Roussel, the French multi-millionaire. Roussel left the land to his family, which encompassed what is currently known as El Madroñal, La Zagaleta and La Reserva de Alcuzcuz, meaning that the family owned 1,500 hectares of land. The land began to break into three zones when Saudi multi-millionaire Adnan Khashoggi fell in love with the estate and offered to buy land off the Roussel. Khashoggi then designated the northern zone of the estate La Baraka, where he built many extravagant villas and would throw private events and parties that mirrored the glitz and glamour of Marbella in the 80s.
It's a great answer to the question of whether the location of a property is so important if it has a unique concept. That's why I put uniqueness first.
To put it more down-to-earth, the unique concept and the creation of the story itself when building such a property already creates its value. That's only the first step.
- The second step is non-standard architecture, interior design and unusual landscape. All three of these components work as a whole for the project. Through these components we create a special atmosphere for perception first by the investor and then by the buyer. Atmosphere - this is the most important tool to create the price of the object.
The only "BUT" here is the level of design for these 3 components must be special. If we cannot find an analogue in the market, then we hit the mark.
Given the conservative nature of the market in general, we will find that any novelty in the market, if it is still on trend, will get that market talking about it instantly. Next, the market will look at how successful the project is. And if it is successful, then the market will just copy that success, often posing it as a new trend. This is how trends are formed. Only the successful ones are copied.
Look around you how much monotonous and faceless architecture there is. Why so? The answer is not so complicated. It is all because of the same copying. The cost of building houses in the style of "glass and concrete" (modern architecture) is incommensurable with the cost of complex classic buildings. They are faster and cheaper to build. The style promoted on the market is minimalism throughout. The main cost criterion is the number of square meters and the views from the windows. A trend imposed on the world market is becoming a mass market.
The consumer has a stable perception of the trend, and most people succumb to it. Copying the trend leads to a maximum expansion. In all countries we can see this luxury mass market. There is a whole industry working for this idea.
The question arises: is it even possible to enter such a highly competitive business and is it really possible to get real estate on it, the value of which will not simply decrease over the years, but on the contrary, will increase?
This is another lesson I learned in Asia. The philosophy of feng shui works there, which has a huge impact on people's lives. When it comes to real estate, the Asian's approach is fundamentally different compared to the European. They will never buy an old house for fear of the negative energy left by previous owners. And in terms of investment, Asian investors invest in unique properties. Such properties do not lose their value over the years, even during deep crises and collapsing real estate markets. Unique objects are always in value and always in demand.
Look at what happened in the pandemic. The real estate market is down as a whole, but luxury real estate is not affected. The issue here, of course, is that the concepts have shifted. Almost all real estate over 2-3 million euros is automatically considered elite. We are not talking about such real estate.
On the third step of our discussion is another factor that is closely related to architecture, interior design and landscape. I call it the "visual effect.
Almost nobody pays attention to it. Probably no one has heard of it. In Europe, it is not discussed at all. Meanwhile, it determines 50% of the advertised price of the property for sale.
Ultra Luxury Homes
"Visual effect" is the creation of such a visual image of the real estate, when the viewer gets emotion from what he sees. The ultimate feat is to achieve a state of slight euphoria. To achieve this requires a lot of experience, intuition and the ability to build this visual spectacle in front of the viewer, after which a similar effect will lead to a state of purchase. This is very well understood in Asia and, unfortunately, not understood at all in Europe.
By the way, this is one of the reasons why Europe sees so few real estate buyers from Asia. They have different perceptions. Hieroglyphics is the creation of a visual image, they think in images. This is another reason why Europeans don't understand why "dumb" Asians don't understand long texts or don't agree to make a decision right away from the first meeting. They take all the time to think it over. Businessmen working in Asia have probably noticed that you can discuss the same thing over and over again and see how your partners take it each time as if they were hearing it for the first time.
But it's worth it to change your tactics and the situation changes before your eyes. Asia understands with their eyes. They love pictures, images. So, creating an image is one of the biggest challenges in making a purchase decision. This universal approach can work very well everywhere. It's worth learning from Asians. Otherwise, all people are the same.
When creating architecture, for example, what is valued in Asia is to make the house seem visually as big as possible than it actually is. If a house has 1,000 square feet on the plans, but looks like 2,000 square feet, when perceived externally, it evokes emotion and a "wow" effect.
I intentionally emphasize the perception of, for example, the Chinese, whom in 25 years I know best, because on this proven example you can consider all facets of this visual effect and understand how it works.
China does not like simple forms. What in Europe is called minimalism in architecture, for the inhabitants of the Celestial Empire has no value. Visually must create the value of the object. Looking at the villa for sale, they assess how it looks, whether its appearance corresponds to the amount they are asked for, of course, whether the object leaves an emotion, whether there is a "wow" effect, causing a slight euphoria.
What does it all mean? It means that the property should not just have a face, but also be unique. Then the property becomes a "true luxury" and not just an endless line of "luxury mass market". If the architecture has to prove visually that the value of the object is even higher than it is declared and that the buyer is extremely lucky, the task of the interior is not only to amplify the effect, but to create the very atmosphere inside, when the client doesn't want to leave after the show.
Here, too, there are a few hidden rules that help to achieve this state as well. It's no secret that the human memory is arranged in such a way that it remembers fragments related only to emotions.
Further, we remember the beginning and the end. Visiting large museums confirms this well. How much remains in the memory? We remember very well the beginning of the tour and how tired we were when we left the museum. The last picture remains in my memory. However, let's imagine that after walking for 2 hours through the exhibitions, we suddenly stumble upon a cozy cafe, where we bought a delicious coffee, had a snack, a glass of good wine, chatted and relaxed. We got some positive vibes. So, this is the place in the museum we will remember best.
This example works always and everywhere. Moving on to the interior, here this rule works 100%. Having seen the house from the outside, evaluated all its charms and having made up our mind that outwardly it looks even more expensive than the declared value, we go inside.
Luxury Home Interiors
I have already said that for properties rated "true luxury" the approach must be special. The consumer should not have to think about anything. Everything, including the interior, has to be turnkey services.
The face of the house is the main lobby. Architects should not reduce its size. The first impression is the most important to the success of the purchase.
"You can't make a first impression twice."
If we lose and fail to make a first impression of the interior, the buyer will be left with a slight residue of disappointment. Correcting that is not easy!
So, we need to make that first impression, the design needs to be stunning. This is where we need to spend the most to keep the attention and move on.
All of the front rooms of the villa are the pride of the owners. It is these areas that guests see, and it is by these areas that the overall impression of the buyer is formed. Therefore, another rule applies here, in addition to all the same "visual effects". I call this rule "creating a wow effect".
"Wow effect" is, first of all, to make the viewer focus on the desired object of the decor and, secondly, to get emotion from what they see. The more emotions, the louder the cry of WOW is.
Why do I pay so much attention to such objects of decor, which I call "an eye catcher"? Because they are the ones that create the illusion of the expensive and meaningfulness of the interior, turning it into Art. It's this ability to create decorating with objects that could have a place in art galleries that helps increase the sale value.
After all, when we come to contemporary art galleries, we expect to see big price tags there, right? It could be designer furniture, bespoke wall panels, uniquely designed interior doors, anything that would make the eye catch a certain object in the interior that our gaze falls on when we enter. And then, it is the art of the decorator to create an atmosphere of coziness. Light, music and smells when examining such a property are other stimuli we need to influence our desired receptors.
Remembering that the viewer will remember the last act of our action and usually the last thing the buyer is shown is the pool in the basement. This is where the extravaganza is needed. We need its last WOW.
- The last step in our ascent to the heights of luxury is the price of the project. It is the culmination of the whole spectacle. If it turns out that the price of the property is just a gift and getting what we see for that money is almost impossible, then we get a bargain.
Let's look at why seemingly incredible solutions in architecture, design and landscaping, the cost of which simply can't be low, can make a project interesting for both the investor who invests in construction and the buyer.
Today, there is a lot that European factories simply cannot do. The crisis in Italy, for example, which was a trendsetter in furniture, has led to the fact that many factories have closed. The part, which remained afloat, cannot maintain a permanent staff of workers, and has to invite them only when receiving an order. Rising prices in Europe have made it impossible to produce complex pieces of furniture because of their high cost. Unique skills are being lost.
What is interior design in Europe? As a rule, with the exception of bespoke models, which designers try to bring to customers' interiors, and which cost too much to afford them on a large scale, designers work with what the remaining factories on the market offer. Their creativity, by any means, is limited by the capacity of production.
In Asia it is the opposite. The luxury industry has not lost its relevance, demand gives rise to supply. Centuries-old experience and unique Chinese craftsmanship, for example, allow us to create masterpieces, which in Europe people just do not think about.
The Investment Club uses its own production facilities and factories of its long-term partners to complete all real estate projects. However, these productions remain in a niche. They are not in foreign markets. They serve the local elite. We know them only because we have worked there for 25 years and have supplied goods from these factories ourselves.
The cost of production in Asia is still incommensurate with Europe, and the opportunities for production exceed all expectations. Therefore, when designing we do not think about whether it is possible to produce or whether the budget of the project will be able to afford those or other costs of goods. With extensive experience in this business, we understand in advance the cost of goods for decoration.
Creativity is not limited by anything, so you can create unique interiors, decorate facades with expensive materials, and create unique decoration fragments from stone and marble.
This is the main feature of what we create. That's why real estate looks very expensive, while remaining affordable in the "true luxury" category.
And lastly, it is landscapes. If you look at the market in Marbella, which is where we plan to implement projects of the Investment Club, with respect to landscape design the situation is simply depressing. Most of the creations of landscape designers - is the so-called "lawn design": green grass, some flowers, bushes, a couple of large trees. Because of the high cost of labor, even with the low price of the plants themselves, which can easily be imported from plantations in Morocco, the cost of landscape design is too high.