“Bulk buyers” risk it all by snapping up multiple units in luxury developments

The strategy means pooling investment in one place rather than spreading it wide

Conventional wisdom advises real estate investors to spread their risk across a diverse portfolio. But not so for “bulk buyers” who prefer to invest in multiple luxury units in single developments, often against the wishes of their financial advisors.

“Bulk buyers” may use their multiple units to house guests or extended family, to generate rental income, or to cobble together a dream home, the Wall Street Journal reported. But the strategy requires total faith in the specific development, and its management team.

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A PropertyShark report shows that 211 individuals in New York City own between three and 10 units in a single building. In Chicago, 342 owners do and in Los Angeles, 181 owners do, the Journal found. The report also shows that many bulk buyers use LLCs to make purchases. (PropertyShark’s report doesn’t track owners with more than 10 units in a building, or whether there was overlap between buying in their own name and also using LLCs.)

As with bulk buying of food or home goods, bulk real estate investment can save buyers money. Neil Johnson, managing director of Ohana Real Estate Investors, a developer of luxury resorts in California, Mexico and Park City, Utah, told the Journal he sometimes offers bulk buyers a 15 percent to 20 percent discount off the listing price. [WSJ] – Decca Muldowney