For most people, buying a home is a milestone and a major financial commitment. For the ultra-wealthy, however, housing serves a different purpose entirely. It reflects a move within a broader financial strategy to build their real estate portfolios.
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GOBankingRates spoke with real estate experts who work with luxury buyers to find out how much the ultra-wealthy spend on housing compared to the rest of us.
The Price Gap for Housing Between the Two Is Massive
When looking at sale prices, the difference between what the ultra-wealthy and average buyers spend is staggering.
“Newer homes in Atherton and Palo Alto that the ultra-wealthy are buying start at $25 million to $30 million and can go up to $50 million or more,” said Chris Iverson, luxury real estate agent with Sotheby’s International Realty in Palo Alto.
They typically include “10,000 square feet of living space, a main house, a guest house and a pool house,” added Iverson.
This price comparison differs significantly from the national average home value of $357,445, according to Zillow data.
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The Real Spending Shows Up After the Purchase
The real investment comes after the closing. The surprise for most middle-class homeowners is “how much the ultra-wealthy spend on [home] security,” Iverson said.
Although they buy properties in communities that offer privacy and security, they often add additional security features, such as “private security guards, security dogs, fences and walls, detection and monitoring systems to detect intruders, and safe rooms,” Iverson said.
He added that some buyers purchase surrounding properties to increase privacy.
“Mark Zuckerberg bought all of the neighboring homes around his estate in Palo Alto to create a buffer.”
Ultra-Wealthy Buyers Treat Housing Like an Investment Strategy
The ultra-rich buy homes “in the same way others construct an investment portfolio — strategically, in multiples, and with no upper limit,” according to Sain Rhodes, a real estate specialist at Clever Offers.
At the high end of the market, buyers make housing moves as part of a long-term strategy, not day-to-day needs tied to a single home purchase with one mortgage.
The Ultra-Wealthy Do Rent — But Not Like Everyone Else
It’s common for the affluent to rent short term and vacation housing. However, rental prices go far beyond what most renters encounter. Rhodes pointed to “full-floor luxury rentals in Manhattan renting for $50,000 to $150,000 per month,” and “summer homes in the Hamptons in oceanfront estates that rent for “$500,000 to more than $1 million for the summer season.”
On European summer vacations, rentals in Monaco and the French Riviera “can exceed $100,000 per month,” Iverson said.
The ultra-affluent also rent housing when they are shopping for their next purchase.
“They may rent properties for six to 12 months. However, they “rent compounds, penthouses and private estates,” Iverson said.
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This article originally appeared on GOBankingRates.com: How Much the Ultra-Wealthy Spend on Housing Compared to Everyone Else
