Instead of focusing upon the look and decor of celebrity homes we thought it might be interesting to take a look at the nuts and bolts of making money in real estate. One example we came across recently involved basketball star Stephen Curry who currently earns $11 million a year. He bought a 7520 ft.² mansion in Walnut Creek, CA for $3.2 million in 2015. So, how did Stephen Curry lose money on his Walnut Creek property?
Having acquired the property in November 2015 for $3.2 million this Mediterranean style mansion with five bedrooms and six bathrooms was treated to a $500,000 renovation. Quite why you would buy a $3.2 million property and then spend a further $500,000 renovating it is a little strange. So, fast forward a year and the property was relisted at $3.7 million which would in reality mean he would “wipe his face” with his investment. However, in July 2017 the basketball super star was forced to take a $3.195 million bid to get rid of his property.
Not only has he lost money on his original purchase price but he has also invested a further $500,000 renovating the mansion. Why?
The best is not always the best investment
While a $3.2 million real estate investment for somebody earning $11 million a year would not break the bank, consider this, the median listing price for properties in Walnut Creek is just $750,000. So, Stephen Curry bought a property, the best of the best in the area, which was four times the average list price. What does this mean?
Experts have been quick to suggest that the massive increase on the average price in the area confirms there is little demand for high-end property. There is also pressure being exerted on top of the range properties to bring them nearer the average price. End result, little demand and a serious threat of price reductions.
Did he try to sell too quickly?
Those who have been looking over the sale of Stephen Curry’s property believe that he was caught in a double whammy. He paid top dollar at the peak of the market for properties in the Bay Area and then he tried to sell the property within 12 months which for many people is too soon to make a profit. Even though it is likely property prices in the area will pickup in due course there appears to be some downward pressure at the moment.
Close but no cigar
Real estate agents in the region describe the Bay Area as “white hot” and while the property Stephen Curry acquired is associated with this region it is 50 miles from the white hot spot. As a consequence, it is not able to demonstrate the views seen in Bay Area properties and the potential buyers pool decreases the further away you are from property hotspots. End result, limited demand and a lack of competition amongst buyers not willing to pay top dollar.
It is not clear what the $500,000 renovation budget was spent on although what is clear is the limited value for money when looking at the cost of the new style home. This is a perfect example of spending money on renovations where there is limited opportunity to claw back this money with an updated valuation. While someone on an $11 million annual salary would not miss $500,000 this is not the point when you’re looking at value for money real estate investment.