Opinions on luxury properties

[Tom NA]

Hi all,

As a relative newcomer with more than an ounce of caution and skepticism, I wanted to get some opinions on investing in "luxury" properties. I've been looking to passively invest, using my cash and credit, and parter with others and because I can bring excellent credit, income, and some cash to the table, I've heard from several people that focus on these properties. One person finds properties between 50%-75% of value and then has a "guaranteed" purchaser of any of these properties at 80% value. Another buys well below market, holds for a couple years while renting to execs through a placement firm, and then sells. The list goes on.

Of course in the end, it's really my money, my credit that's on the line. Sure they found the deal but if something happens, it's my million dollar house with million dollar payments to worry about. My experience tells me that moving these properties and for that matter, valuing these properties is indeed quite difficult due to the lack of good comps as well as the much smaller pool of buyers. After all, ultimately an appraisal is only as good as the piece of paper it's written on - the true value is what someone will pay me.

All that said, I'd like some opinions on investing in luxury property - how do you experts feel about it? Does anyone here actively work at those levels or do most people work on lower dollar houses? I guess just like any other investment, it depends on the numbers - the discount you get when buying as well as the exit strategy but I think my great hesitation is that at the higher dollar values, the margin for error can be catastrophic vs. much less when you're buying $50k properties. Any thoughts and experience appreciated!