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Hidden Costs of Luxury Real Estate

Orange County Luxury Real Estate

Luxury real estate in Newport Beach, Laguna Beach, Corona Del Mar, and greater Orange County is impressive, extravagant, and, of course, expensive. That should come as no surprise; it’s right there in the name! Luxury is defined as “conducive to sumptuous living, usually a delicacy, elegance, or refinement of living rather than a necessity.” But even if you’ve got the cash to buy a sprawling, lavish estate, there is more than the listing price to keep in mind. In this article, we’ll cover some of the hidden costs of owning a luxury home.

While you may have the resources to buy a luxury home, it’s important to be aware of externalities. Much like starting a family, it’s only prudent to be prepared before shouldering a new bundle of responsibilities. As your trusted real estate advisers, a crucial part of our job is to ensure that you’re as informed as possible. So let’s explore some examples of the expenses that come with buying a luxury home.

More Than You Can Chew: A Case Study in Luxury Homes

Sixteen years ago, rap artist and former beverage mogul Curtis James Jackson III, aka 50 Cent (Fiddy), purchased a grand Connecticut estate. Nestled 80 miles north of the wealthy town of Greenwich near NYC, the residence at 50 Poplar Hill Drive boasts 52 rooms across 50,000 square feet. Some of the property’s opulent features include a nightclub, two private pools, both indoor and outdoor basketball courts, and a recording studio (naturally). The home is larger than others in the area, which didn’t help when it was later listed for sale.

Fiddy bought the estate in 2003 from another famous face, one Mike Tyson of boxing fame. The sale price then was $4.1 million. After a few years of owning the property, Fiddy listed the home for sale at $18.5 in 2007. At such a dramatically increased price, the listing did not sell and was taken off the market. By 2015, Fiddy again listed the home for sale. This time, the price was $4.995 million, but again the home did not garner the asking price. Finally, he sold the property in 2019 for $2.9 million to Florida businessman, Casey Askar. That’s an 84% price drop from his 2007 asking price of $18.5 million.

Such a drastic decrease begs the question: Why did Fiddy sell? The answer is in the hidden costs. Reportedly upwards of $70,000 each month, the upkeep and maintenance costs of the lavish estate were simply too much for Fiddy to handle. From the 50,000 sq ft of 52 rooms, to the lawns and the pools, the estate at 50 Poplar Hill Drive required constant effort from groundskeepers and staff. Not to mention utility bills to keep the residence warm throughout the winter, or cool in the summer. In just five years, that monthly cost would add up to the total that Fiddy paid for the original sale, and he could no longer justify the expense.

A Luxury Home Takes a Village

If you’ve watched the popular period drama Downton Abbey, then you are one step ahead of ol’ 50 Cent in knowing that running a palatial estate is a team affair. There’s the estate manager, the household manager, the butler, the chef, the cooks, the gardener, the gameskeeper, the stewardess, the chauffeur, the parlormaid, the chambermaid, housemaid, laundrymaid—the list goes on. But while the costs are steep, they do come with perks: keep your house in order and you may even be graced by a visit from the Queen!

In all seriousness, your home need not be a sprawling estate to be considered “luxury.” In the simplest sense, a luxury home is one that is valued well above the average in a given market. In many US cities and metro areas, a price of $1 million is often considered the starting point for luxury homes. In markets like San Francisco and New York, where prices are substantially higher than the national average, luxury is said to start around $4 million.

On the bright side, you do get more for the higher price tag. Luxury homes, whether a charming San Francisco Victorian or a giant midwest mansion, tend to come with more square footage and fancier features than the average home. But of course, there’s a hidden cost there, too. For a large luxury property, simple tasks like cleaning your gutters or mowing the lawn become a considerable expense. Want to upgrade to smart devices and appliances? It’ll cost a pretty penny to do so across your whole home. While you may have the money to cover these additional expenses, it’s important to be aware of them when planning your home purchase.

Luxury Mortgage and Tax and Insurance, Oh My!

Let’s take a look at another famously fancy luxury home with hidden costs. When Yuri Millner, a Russian-born tech investor, bought his Silicon Valley home in 2011, the sale price of $100 million broke records in California and Santa Clara County. The Bay Area estate sits on 11 acres with structures of roughly 25,000 square feet, and includes a ballroom, a theater, a spa and a gym.

Interestingly, the taxable assessed value of the home has marked around $50 million by the Santa Clara County Assessor, just half as much as Milner paid. Yet that still means Yuri is on the hook to pay over $600,000 each year in property taxes. If Yuri has a mortgage, his payments will be whoppers as well. If he financed the home using a standard 30-year fixed conventional loan with 20% down and $80,000,000 in principal, his monthly payments would total nearly $400,000.

Of course, a Russian oligarch or any other billionaire likely is not concerned with middling expenses in the mere hundreds of thousands. But the fact remains that, as a home price grows, so too do its associated costs. Getting insurance for a $100 million home is nigh impossible, but insurance on a $5 or 10 million home is just plain expensive. From the tax man to your loan officer, you’ll be paying the pipers by the truckload.

Your Orange County Luxury Experts

Home ownership always comes with additional costs. But despite the increased expenses, buying a luxury property in Newport Beach, Laguna Beach, or Corona Del Mar can be incredibly rewarding. The stunning views, the lavish spaces, the fixtures and finishes each provide a magnificent setting for your modern lifestyle. We love matching our clients with the perfect home to fit their tastes and their budget. If you’re looking to buy or sell a luxury property, get in touch to start the no-pressure conversation and explore your options.

The Importance of Interest or: How I Learned to Love the Fed

The year is 1984, and despite Orwellian predictions to the contrary, nothing seems to be going poorly at all as you amble down your tree-lined street. A neighbor cheerfully hollers across the road, but with Purple Rain cranking through your Walkman, you can’t quite make out what he said. Nudging the headset off one ear, you hear him repeat, “Howdy neighbor!” Well, howdy, yourself!

You’ve rented here for quite a while. It’s a sleepy little suburb with friendly folks and good schools. For years, you’ve saved diligently with the goal of making an offer on one of the charming homes for sale that you see every day on your walks. Browsing the Yellow Pages and consulting with friends, you finally found a real estate agent who you can trust. Now all that’s left is to get approved for a mortgage! Considering your outstanding credit, the lender is willing to make a deal—thirty years fixed at a low rate of just fourteen percent!

Today’s Rates are Hard to Beat

It may seem crazy to young homeowners and aspiring buyers, but throughout the 1980s the national average mortgage interest rate was well into the double digits. Recession and inflation starting in the late 70s prompted drastic measures from the Federal Reserve who cranked up interest rates to even as high as twenty percent. Since then, and especially after the financial crisis of 2008, the average rate has seen a precipitous decline. After years of wavering around four percent, the notion of a thirteen or fourteen percent mortgage is unthinkable to most new and would-be homeowners.

Let’s compare an average 30-year fixed-rate mortgage in August 1984 with August 2019:

Loan of $200,000, 30-yr fixed
- August 1984 avg rate: 14.47%
  - Total cost over lifetime of mortgage: $879,962
- August 2019 avg rate: 3.62%
  - Total cost over lifetime of mortgage: $328,154

In 1984, your mortgage would cost over four times the amount borrowed over the course of the loan. Whether you’re bearish or bullish on the economy as a whole, with a little perspective it’s abundantly clear that home buyers have it very, very good these days. As an extreme example, the stark contrast illuminates how important interest rates are in a home purchase.

Using more recent and normal examples, the current average still beats recent rates including just last year. In August 2018, an average fixed-rate loan of $500,000 would cost you $917,389 over 30 years. One year later in August 2019, you would save nearly $100,000, at $820,386 over 30 years. That’s a huge difference and huge savings after a rate drop of less than one percent (4.55 to 3.62%).

Use Low Interest Rates to Your Advantage

So what does this all mean? First off, it’s clear that buying a home when rates are low is the most effective strategy to ensure that you’re getting a good deal. Both buyers and sellers benefit when rates are low, as buyers can afford to borrow more money for less overall cost. When buyers can afford bigger and better homes, competition is increased across the market, listings garner wider interest, and ultimately sellers receive higher offers and closing prices. All at essentially no extra cost to the buyer, because their money simply went further at a lower interest rate.

This also means that homeowners who purchased recently could be eligible to save big by refinancing an existing mortgage above current rates. According to analytics firm Black Knight, four out of five mortgages originating in 2018 are at least 0.75% higher than today’s rates. Additionally, they found that most mortgages from before 2004 could have rates lowered by about 1.75%, leading to massive savings.

We’re Happy to Help

Inevitably, the Federal Reserve will raise interest rates and the market will retract to some degree. Of course, nothing about the economy happens in a vacuum, and there are always countless extenuating factors. So we’ll skip making bold predictions. Instead, we will simply recommend this sage old advice: “Get while the gettin’s good.” Rates are nearly as low as they can be, and real estate is entering its most active time of year. If you’ve been thinking of buying or selling, now is an excellent time to do so! Give us a call to find out how we can help.

The Best Newport Beach Neighborhoods: A Look at West Newport

Welcome to the next edition of our Neighborhood Spotlight Series, where we provide a little insight into some of the best neighborhoods Newport Beach, Laguna Beach and Corona del Mar have to offer, so you can feel more comfortable in the purchase of your new home in Orange County.

This month we will be featuring West Newport, a neighborhood in Newport Beach that boasts over two miles of coastline and some of the best beaches in Newport. West Newport is ideally located where the coastline splits into the mainland and Balboa Peninsula, giving it a ‘beach city’ culture. This means West Newport residents enjoy the best of both worlds, with the convenience of quick access to the rest of Newport Beach, as well as the restaurants, shopping, and attractions that the peninsula offers.

We have created an infographic to provide a quick glimpse into some of the housing and residential statistics that a potential homebuyer may be interested in. We hope you find this information helpful!

We happen to have a beautiful property currently on the market, that’s located on the edge of West Newport, but in a prime oceanfront location. This spacious multi-unit property at 2212 W. Oceanfront totals approximately 3,200 square feet and includes a 2-bed double-master unit with 3 baths upstairs, as well as a 3-bed, 2-bath unit downstairs. Both the upper and lower units feature a chic updated interior and stellar ocean views. The prime waterfront location provides convenient access to hip shops, restaurants and bars. Wake up with a stroll along the shore and an espresso at Urban Cup, pop in for lunch at local favorite Dory Deli, or enjoy a night out at newly-opened Fable & Spirit nearby. Whether you choose to rent both units or keep one for yourself, one thing is for certain: your residents will love waking up to the beach right outside their door.

We know that trying to settle on the right Newport Beach neighborhood as you’re looking at homes for sale in Orange County can be tricky, but here at The Stavros Group we’re here to provide a helping hand and make the process of buying the Newport Beach home of your dreams as easy as possible. Please do not hesitate to give us a call!

Newport Beach Luxury Homes for Sale and Recent Updates

Summer is already starting to draw to a close, but temperatures are just beginning to pick up….as is the market!

We have a unique selection of Newport Beach Luxury homes for sale available at the moment — from a gorgeous luxury farmhouse to an ocean view duplex on Balboa Peninsula to a custom Santa-Barbara influenced home within walking distance to the beach. Whether you’re looking for some additional income or the perfect property for yourself, we strive to offer some of the best possibilities Orange County has to offer. And it has some stunners!

In other news, REAL Trends just released their 2019 America’s Best Real Estate Professionals list, and we are so honored to have been added to this list!

According to Steve Murray, the president of REAL Trends, “Those individual agents and teams who make up the 2019 America’s Best Real Estate Professionals represent less than 1.5 percent of all Realtors® in the country yet account for over 12 percent of the closed transactions and more than 22 percent of all the sales volume closed last year.”

What an amazing statistic to be a part of — our goal is to keep this momentum going and continue to perform our best for the best clients. I once read the following quote and it seems fitting:

“Don’t work for recognition, but rather do work worthy of recognition.”

This is what we strive to accomplish every day we come into work! Numbers are great, but a satisfied client is lasting.

We’ve had a few new spectacular properties come on the market recently that I must share with you!

Looking for an investment opportunity in Newport Beach, or just need a multi-unit property for you and your family? We’ve got a great one for you.

This ocean view dual complex home at 216 21st St. is a great income-producing property. This property comes fully furnished, and you can immediately enjoy rental income from existing short term rental bookings. The upper owner’s unit features 3 bedrooms and 2 baths, a large master, vaulted ceilings and open floor plan. The downstairs unit features 2 bedrooms and 2 bathrooms with a rear private patio. Both units completely remodeled with new cabinets, travertine floors, granite countertops, recessed and cable lighting, tankless water heaters and stainless steel appliances. Exterior and interior freshly painted. Newer windows and doors. Located close to Newport Beach Pier, restaurants, shopping and night-life. All utilities have been separated, making this the ideal income property.

And we can’t get over this gorgeous luxury farmhouse-style home at 2101 Leeward Ln. that was just reduced by $220,000! Completed in 2019, this exceptionally appointed home in Newport Beach’s Dover Shores community showcases on-trend style and state-of-the-art smart-home technology. Curb appeal is off the charts, with Modern Farmhouse architecture complementing a soft-contemporary interior with 6 bedrooms, 4 baths and a bonus room in approximately 4,226 sq.ft.

As always, do not hesitate to reach out with any real estate questions or needs! We hope to hear from you!

The Best Newport Beach Neighborhoods: A Look at Dover Shores

This month we will be featuring Dover Shores, a charming residential neighborhood in the heart of Newport Beach. Although mostly quiet and very family-friendly, Dover Shores is not short on beauty and things to do. With the Upper Newport Bay (or Back Bay to the locals) bordering just to the east, you’re close to ten and a half miles of some of the most picturesque running and biking trails in Southern California. Many homes are even lucky enough to boast panoramic views of the Back Bay area. The community also has three private beaches, all which feature summer lifeguard service and are perfect for families. You’re also only a stone’s throw from Irvine Avenue, which boasts a wide variety of restaurants, shops and other retail needs. Or if you’re looking for a night on the town, head over to Fashion Island for some world-class shopping and dining. This is becoming a desirable neighborhood, so bear in mind that Dover Shores homes for sale go quickly!

We happen to have a beautiful home in the Dover Shores neighborhood that will be yours for the taking when it hits the market on July 8. Completed in 2019, this exceptionally appointed home at 2101 Leeward Ln., showcases on-trend style and state-of-the-art smart-home technology. Curb appeal is off the charts, with Modern Farmhouse architecture complementing a soft-contemporary interior with 6 bedrooms, 4 baths and a bonus room in approx. 4,226 s.f. Discover light European oak wood flooring, white walls and millwork, a formal living room, large family room, and an enormous chef’s kitchen with marble countertops and stainless steel appliances. Entertaining is a delight in the backyard with a pool, spa and raised deck.

When Is the Best Time to Buy a Home in Newport Beach?

As an Orange County real estate professional, I am often asked when the best time to buy or sell a home in Newport Beach is. It is no secret that the Spring and Summer months are when the real estate market booms — with, statistically, the most homes being purchased and sold in the month of May. There are many reasons for this, including the warmer weather, longer days and kids being out on summer break, that lead to a spike in real estate in these months. While these ‘prime’ months are no doubt a great time to make your big move in the real estate arena, this time of year isn’t the only good time to put your Laguna Beach home on the market and even purchase one of the beautiful Newport Beach oceanfront homes for sale you’ve been dreaming of. There are a variety of considerations that you should factor into your decision that are specific to each family, before determining when is the appropriate time to embark on the next chapter of your lives. We’re breaking down a few of the notable factors you should take into account before making this big life decision.

Finances

Thinking about where you are financially may be one of the biggest driving forces in determining when the right time for you to buy or sell is. When thinking about buying a new home in Newport Beach, some of the questions you may want to ask yourself are:

-Do I have the income and credit score I need to qualify for the loan I want?

-Do I have a down payment saved?

-Can I afford the extra costs that come with homeownership, like property taxes and maintenance?

Another thing to consider are the costs that come along with moving. You may want to take into account whether you’re just moving from one home in Newport Beach to another, or if you’re moving cross-country to a new home in Orange County. According to the American Moving and Storage Association, the average cost of a move within the state is $2,300, while moving across states costs, on average, around $4,300. Buying a home is a major life decision that should carefully be thought out so that you’re not starting out the new chapter of your life on the wrong foot.

Major Life Changes

However hard you try, it’s not always possible to precisely calculate when you plan to buy a home in Newport Beach. Life often gets in the way, and sometimes plans get disjointed. But what is the right homebuying process or timeline for one family might not be the perfect one for you, which is why it’s critical to take all matters into account and think through if your family may be going through any major life changes in the near future. Some such life events include:

-A new baby: do we need more room to accommodate a growing family? (Or on the flip side, do we want to downsize for the retirement phase?)

-A new job: will I be required to move to be closer to my new job and if so, will this be my forever home or just a temporary position?

-Relocating to provide better schooling opportunities for my children

-Relocating to be closer to relatives in need

Seasonality of the Real Estate Market

As mentioned before, the Spring and Summer months are statistically when most people tend to buy and sell homes. The days are longer, the weather is generally warmer, you’ve recently been issued your tax returns, and kids are out on summer break. Due to these reasons, there is typically a flock of buyers on the hunt during these months, making it a slight seller’s market. However, the fact that sellers may have a slight advantage shouldn’t dissuade buyers from coming out during these months, as there are also numerous benefits to buying during this time. Because of the high demand, there, in turn, are also generally more homes on the market, as well. Depending on the market you’re in, buyers could actually have some bargaining power if the saturation of homes is great enough.

Generally speaking, the winter months tend to be a slight buyer’s market, as there is not as much demand during this season, giving the buyer a bit more advantage. If you are extremely flexible about when you are able to sell your home and/or buy a new home in Orange County, then taking these seasonal trends into account might be key for you. However, life typically makes things a bit more complicated, so while it may be beneficial to take note of these trends, it shouldn’t be your driving force.

Local Market Trends

One of the final factors a potential seller or buyer should take into account is what the real estate market looks like in your area. Interest rates are unpredictable and are a factor you should probably not make your decision based solely on, however, can be a beneficial (or unfavorable) factor in your decision, so should be considered in the process. Are interest rates at an all-time low and expected to rise in the next year? If so, it might be the time to buy property in Orange County! Or vice versa. Interest rates may be extremely high and are predicted to improve over the next year or two, so you’ve been holding off on your home purchase dreams.

Whatever considerations you take into account, the best time to begin house hunting will be unique to each potential homebuyer. If you find that now is the best time for you and your family to buy or sell a home in Newport Beach, Laguna Beach or Corona del Mar, then I’d love nothing more than to help you accomplish your real estate goals, obtaining the best profit on your home and placing you in the new home of your dreams. Please contact me today so we can discuss a plan that best fits your family.

The Best Newport Beach Neighborhoods: A Look at Newport Canyon

You’ve decided to make the move to Orange County and you’ve even started browsing some houses for sale in Newport Beach. If you’re new to the area, the next step in your house hunting journey may be, “What is the best neighborhood for me?” Well, we’re here to help out, as we introduce our Neighborhood Spotlight Series, where we will provide a little insight into some of the best neighborhoods Newport Beach, Laguna Beach and Corona del Mar have to offer, so you can feel more comfortable in the purchase of your new home in Orange County.

The first up in our Newport Beach neighborhoods feature is Newport Canyon. Newport Canyon is a well-established community located near the 73 Freeway, cornered by University Dr. and Jamboree Rd. and sits right next to Bonita Creek Park. A popular neighborhood in Newport Beach, this peaceful gated community is a prime example of why homebuyers are attracted to this area. Located at the bottom of a hillside, residents of this neighborhood enjoy a secluded, resort-style lifestyle, complete with around-the-clock guard patrol, a beautiful community pool and spa.

One of the beautiful, highly sought after homes in the Newport Canyon neighborhood is this one of a kind property at 3137 Corte Marin. The gorgeous Mediterranean-style architecture combined with modern granite and marble touches on the interior are something you don’t want to miss.

We know that trying to settle on the right Newport Beach neighborhoods as you’re looking at homes for sale in Orange County can be tricky, but here at The Stavros Group we’re here to provide a helping hand and make the process of buying the Newport Beach home of your dreams as easy as possible. Please do not hesitate to give us a call!