Every year, the real estate market faces new challenges, triumphs and trends. When we are working with clients, it’s our job to make sure that we properly educate them on how to best invest their time, effort and money.

For luxury real estate, which comes with a hefty price tag, providing that expertise becomes all the more crucial. As real estate agents, we need to be armed with the most up-to-date and relevant information concerning the housing market that is available.

Differentiate investors vs. homeowners

Before going any further, we need to make one important distinction. Luxury real estate has two different types of buyer. One is the homeowner who is looking for a luxurious property for themselves and possibly a family.

The other is the more common purchaser, which is the investor. This client might also live on the property either all the time or part of the time. However, their goal is to hold that property for as long as it gathers value.

Your first step is always to know which kind of buyers you are working for before you dive in. Ask them about their long-term goals when it comes to that luxury property. That will give you a better idea of which properties to show in the first place.

Tailor your language

A good real estate pro needs to know how to customize his or her language, so the above client types are hooked.

For instance, you have a couple with two small children and a household income of $500,000 per year, with another $300,000 in savings. What do you tell them about the properties you showcase?

  • “This property has a gorgeous fenced-off yard with a separate grassed area perfect for children to play, while adults enjoy the large patio.”
  • “The local schools are highly rated, with both public and private options.”
  • “Downstairs has a second living room that the former clients converted to use as a playroom.”

Now, imagine saying one of those statements to an investor. Will they care? Probably not. They will want to know whether the area has seen an increase in home values over the past year. Or maybe you can catch their attention by telling them the expected rate of monthly returns if they use it as a form of passive income.

Know your property values

Because most luxury real estate is going to be bought by investors, you need to know the value of every property that you show. Not as it stands now, but what value it will gain once it has been upgraded.

Investors are going to hold onto the property and resell when the value surges, rent out the property or fix it up and flip it for a higher amount. Do you know how much each of those options are going to net them?

The first option can be estimated based on how similar houses in the neighborhood have grown in value over the years. You can show the client the statistics directly from the market and allow them to draw their own conclusions.

Second is the renter, a much less common form of investor. Once more, you can show local statistics that factor not for resale value, but the price of luxury rentals in the region.

Last is the flipper, which can be advised using the same 70 percent rule many real estate pros are already well acquainted with. You take the estimated price of the property following upgrades based on an average. Next, find 70 percent of that cost and subtract the cost of the upgrades or repairs.

Your client should not pay anything over the number that the 70 percent rule gives. Although it isn’t a guaranteed measure of success, it gives a nice, solid set point to work from and will help narrow down the properties they should be purchasing. It is one of the tricks of the trade that can be invaluable.

Be up-to-date on market trends

Any real estate agent worth his or her salt is going to be up to date on the current market. That doesn’t just mean interest rates, home values and mortgage issues. Trends, both fleeting and consistent, are also a part of that knowledge base.

The more you know, the more your clients can rely on you. Before long, you will build a reputation for luxury real estate. And if there is anything you can count on from both homeowners and investors alike, it’s referrals.

Jackson Cooper is a writer and real estate enthusiast at Jensen and Company. Follow Jensen & Company on Twitter or Facebook.

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