Even in the most desirable destinations, your investment can underperform.
Luxury real estate investing continues to attract accredited investors seeking both lifestyle alignment and global portfolio diversification. But beauty doesn’t always equal performance—and this asset class carries unique risks that are often underestimated.
Here are five common investing mistakes when it comes to luxury real estate—and considerations to approach the sector more strategically.
1. Confusing Personal Taste with Market Demand
That cliffside villa or Balinese retreat may feel like a dream getaway—but that doesn’t always translate to income generation or sustained guest demand.
Some investors may prioritize what they love rather than what performs in the market. As a result, they may overpay for properties in areas with variable tourism trends, weak rental data, or limited seasonal demand.
Considerations:
Consider focusing on markets with established infrastructure, repeat tourism trends or patterns, and consistent average daily rates (ADR). Use third-party data and industry benchmarks rather than relying solely on personal preference. Let objectivity lead—not the aesthetics.
2. Believing You Can Self-Manage from a Distance
Luxury vacation rentals often attract guests seeking positive, high-quality experiences—concierge service, pristine upkeep, responsive communication. Trying to manage that from abroad, or delegating to unvetted local teams, can erode value and reputation.
Considerations:
Invest through platforms that offer integrated property management and local oversight. White-glove service and dynamic pricing strategies help achieve positive guest satisfaction, protect the asset, and allow for the potential to enhance income, while still maintaining a hands-off approach to day-to-day management for investors.
3. Overlooking International Ownership Complexity
Investing internationally introduces a new layer of complexity. Local real estate laws, taxation, regulatory hurdles, currency volatility, as well as other factors, can significantly impact investment outcomes and should be carefully evaluated as part of a comprehensive investment strategy.
Considerations:
Consider working with professionals who understand international asset structures and compliance. Always consult with your own legal and tax advisors before making any cross-border investment decisions. Thoroughly and carefully review offering documents and risk disclosures—not just marketing materials.
4. Accepting Pro Forma Projections Without Scrutiny
Not all forecasts are created equal. Some sponsors may build their financial models on peak seasonal rates and unrealistic occupancy assumptions. Glossy presentations don’t always reflect conservative and accurate underwriting.
Considerations:
Dig into the assumptions—not just the top-line returns. Ask for base, downside, and conservative scenarios. Review how projected income compares to historical performance in that market and how expenses are modeled. Thorough due diligence can help investors better understand and evaluate the potential risks and outcomes.
5. Overlooking Sponsor Transparency and Alignment
If it’s not clear how the sponsor earns money, or how they prioritize investor capital, proceed cautiously and seek clarification. For some real estate sponsors, investments can be as much about branding and presentation as it is about performance.
Considerations:
Investors may consider looking at sponsors whose interests are aligned with their own —ideally through performance-based compensation structures, direct reporting and reporting practices in general, and a track record of transparency. Understanding how decisions are made, how capital is allocated, and who’s ultimately accountable for outcomes can provide valuable insight into how an investment is or will be managed.
Final Takeaway
Luxury real estate isn’t just about location—it’s also about how it’s managed, structured, and whether it’s aligned with your broader investment strategy. A well-structured investment opportunity, with the right sponsor and structure, may offer global diversification benefits without adding complexity to your life.
About Bona Vita Properties
Bona Vita Properties offers accredited investors access to select international vacation rentals—professionally managed, fully vetted, and offering the potential for income generation. Our white-glove service model is designed to help investors diversify globally while reducing the operational burden.
Get Access to Luxury Real Estate Investment Opportunities by clicking here.
Exclusively for verified accredited investors
Disclaimers
Investments in real estate are speculative and involve risk, including the potential loss of capital. This communication does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any such offer will be made only through a private placement memorandum to qualified accredited investors. Past performance is not indicative of future results. Investors should perform their own due diligence and consult with legal, financial, and tax advisors before making investment decisions.
These materials may contain “forward looking statements” and actual results may differ from any expectations, projections, or predictions made based upon such forward looking statements. Prospective investors are cautioned against placing undue reliance on such forward-looking statements. Securities are only available to verified accredited investors who can bear the loss of their investment.
Bona Vita Properties does not provide investment, financial, tax, legal or accounting advice. The contents of this blog have been prepared for informational purposes only, and are not intended to provide, and should not be relied on for, investment, financial, tax, legal or accounting advice. You should consult your own investment, financial, tax, legal and accounting advisors before engaging in any transaction, especially an investment in a cross-border transaction or a foreign property to fully understand the risks of investing.
