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The Top Markets for Luxury Investment Properties in the US

by Eman HamedJul 13, 2018November 29, 2023

Interested in luxury investment properties?

The real estate market is so vast that it includes numerous investment strategies, niches, and properties. Thanks to this, any real estate investor can have multiple investments and a diversified portfolio. At some point in your real estate investing career, you might start to think of owning luxury investment properties. Is this a smart investment decision? If so, where in the US real estate market do property investors find such investment properties? Keep reading to find out.

Why Invest in Luxury Investment Properties

They Promise The Best Return in The Long-Term

Luxury investment properties are known to have a higher quality of furniture, amenities, and facilities. As a result, tenants pay extra money for renting out luxury properties. In addition, this type of investment properties is appealing to real estate investors because they have higher investment value. Luxury investment properties are always in demand, making them an ideal investment that will increase in value and generate a good return on investment as time goes by.

They Attract a Certain Type of Tenants

For property investors, dealing with tenants and attending to their needs is the least favorite part of owning rental properties. Whether it’s having to remind them to pay their rent or fix whatever damages they’ve caused, dealing with tenants can be challenging. However, with luxury investment properties, this challenge is minimalized. The reason for this is that tenants of luxury properties are able to pay the extra money to enjoy high-quality services.

Moreover, luxury properties require less follow-up with guests than other short-term investment properties like Airbnb. Most tenants of these properties are business travelers who stay for a few months, meaning the possibility of them leaving damages is reduced. For real estate investors, this means saving time and focusing on growing their business and making money.

Different Ways to Make Money

Speaking of making money, another reason to invest in luxury investment properties is the fact that there is more than one way to make money off of them. The most common (and profitable) way is renting them out as vacation home rentals. Owning a beautiful vacation rental can generate a high rental income especially in locations that are popular vacation destinations and have warm winters.

Not sure where to buy a rental property? Use Mashvisor’s property finder tool to find the best investment properties in different cities across the US housing market to analyze and compare them and determine where to invest. Click here to start your search!

If you don’t want your rental property to be a liability because it’s not occupied enough to generate a stable rental income, then you can turn it into a long-term rental. Find high-income, long-term tenants who can take good care of a larger place and are financially comfortable to afford luxury properties.

Nonetheless, as a real estate investor, you need to keep in mind that luxury investment properties are not for everyone. You need to have a large amount of capital if you want to own a luxury property debt-free. In addition, although luxury properties yield high rental income, you can’t expect a high occupancy rate unless you’re investing in the right location with a suitable rental price. So, where in the US housing market would a real estate investor find luxury investment properties that are worth investing in?

The Top Markets for Luxury Investment Properties

This information is according to Mashvisor’s rental property calculator – a real estate investing tool that provides data regarding the different values related to a rental property including the cap rate, cash on cash return, rental income, and occupancy rate. Below, you’ll find this data for investment properties in the above markets.

To learn more about our product, read this: How to Use Mashvisor’s Rental Property Calculator

Palo Alto, CA

Median Property Price: $1,915,389
Traditional Rental Income: $4,872
Airbnb Rental Income: $4,034
Traditional Cash on Cash Return: 0.86%
Airbnb Cash on Cash Return: 0.13%
Traditional Cap Rate: 0.86%
Airbnb Cap Rate: 0.13%
Airbnb Occupancy Rate: 54%
Optimal Rental Strategy: Traditional

Oakland, CA

Median Property Price: $858,568
Traditional Rental Income: $3,456
Airbnb Rental Income: $2,672
Traditional Cash on Cash Return: 1.46%
Airbnb Cash on Cash Return: 0.96%
Traditional Cap Rate: 1.46%
Airbnb Cap Rate: 0.96%
Airbnb Occupancy Rate: 57%
Optimal Rental Strategy: Traditional

Santa Barbara, CA

Median Property Price: $1,527,675
Traditional Rental Income: $4,269
Airbnb Rental Income: $4,733
Traditional Cash on Cash Return: 1.08%
Airbnb Cash on Cash Return: 1.74%
Traditional Cap Rate: 1.08%
Airbnb Cap Rate: 1.74%
Airbnb Occupancy Rate: 51%
Optimal Rental Strategy: Airbnb

Scottsdale, AZ

Median Property Price: $887,275
Traditional Rental Income: $3,366
Airbnb Rental Income: $1,957
Traditional Cash on Cash Return: 2.3%
Airbnb Cash on Cash Return: 0.65%
Traditional Cap Rate: 2.3%
Airbnb Cap Rate: 0.65%
Airbnb Occupancy Rate: 46%
Optimal Rental Strategy: Traditional

Santa Clara, CA

Median Property Price: $1,305,052
Traditional Rental Income: $3,585
Airbnb Rental Income: $4,872
Traditional Cash on Cash Return: 0.75%
Airbnb Cash on Cash Return: 1.27%
Traditional Cap Rate: 0.75%
Airbnb Cap Rate: 1.27%
Airbnb Occupancy Rate: 58%
Optimal Rental Strategy: Airbnb

Sunnyvale, CA

Median Property Price: $1,498,660
Traditional Rental Income: $3,715
Airbnb Rental Income: $4,070
Traditional Cash on Cash Return: 1.22%
Airbnb Cash on Cash Return: 1.26%
Traditional Cap Rate: 1.22%
Airbnb Cap Rate: 1.26%
Airbnb Occupancy Rate: 55%
Optimal Rental Strategy: Airbnb

San Francisco, CA

Median Property Price: $1,546,319
Traditional Rental Income: $4,522
Airbnb Rental Income: $5,100
Traditional Cash on Cash Return: 0.85%
Airbnb Cash on Cash Return: 1.26%
Traditional Cap Rate: 0.85%
Airbnb Cap Rate: 1.26%
Airbnb Occupancy Rate: 63%
Optimal Rental Strategy: Airbnb

Seattle, WA

Median Property Price: $860,339
Traditional Rental Income: $2,324
Airbnb Rental Income: $3,431
Traditional Cash on Cash Return: 0.87%
Airbnb Cash on Cash Return: 1.83%
Traditional Cap Rate: 0.87%
Airbnb Cap Rate: 1.83%
Airbnb Occupancy Rate: 58%
Optimal Rental Strategy: Airbnb

San Jose, CA

Median Property Price: $1,065,414
Traditional Rental Income: $3,110
Airbnb Rental Income: $3,055
Traditional Cash on Cash Return: 0.95%
Airbnb Cash on Cash Return: 0.23%
Traditional Cap Rate: 0.95%
Airbnb Cap Rate: 0.23%
Airbnb Occupancy Rate: 50%
Optimal Rental Strategy: Traditional

To start looking for and analyzing the best investment properties in your city of choice, click here.

Final Thoughts

Investing in luxury properties is an attractive strategy for many real estate investors. They are profitable investment properties, however, only when you can afford them and invest in the right location. Make sure to sign up with Mashvisor to get immediate access to our property finder tool and rental property calculator and start looking for the best investment property in any city and neighborhood across the US housing market. Click here to start out your 14-day free trial with Mashvisor today!

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