Renting Properties to Ultrawealthy Tenants Isn’t As Glamorous As It Seems

If you’re a landlord, you’re no doubt aware of all the issues that can arise when you rent your property for the median monthly asking rent in the U.S., which was reported by Redfin to be US$2,002 in May 2022.

But what about an ultraluxury home or condominium, one that rents for US$50,000, $100,000 or even $130,000 per month?

“High-end luxury rentals create unique challenges for landlords because the tenants are high-net-worth individuals, often celebrities, who have special requirements,” said Julian Johnston, a real-estate broker at The Corcoran Group in Miami Beach.

Mr. Johnston, who last year represented the owner of an 11-bedroom, 15-bath waterfront home in Miami Beach that was leased to a celebrity for US$130,000 per month, recently worked on a deal where he had to sign a lease rider stating that “if I needed to go to the residence for any reason that I would not speak to, or look at, the tenant.” Another celebrity client wanted to ensure privacy at the rental home, so Mr. Johnston arranged to purchase $20,000 worth of 2.4-metre-high potted plants that were placed along the sea wall and on bedroom balconies so that paparazzi couldn’t shoot photographs from a boat offshore.

The high-net-worth individuals who can afford to rent these properties often come with high expectations. Many demand almost concierge-level service from their landlords or the agents or property managers working on their behalf.

“In your average landlord-tenant relationship, the landlord pretty much dictates the terms, and the tenant will not have that much say,” said Zachary D. Schorr, a real-estate attorney in Los Angeles. “But when you get into these higher-priced leases, it’s not atypical for an attorney to negotiate the terms of the lease.”

Eric Rollo, a licensed broker and managing partner of the Boston office of The Agency, recently worked on a lease where the tenant was a player for the Red Sox, who was renting a townhouse in Chestnut Hill, just outside Boston, for US$18,000 a month. “He was in Florida at spring training but expected to arrive at a turnkey property,” he said. “So, we had shades installed, the internet and cable hooked up and everything done on the front end to make sure the property was ready.”

Danny Hertzberg, a real-estate agent with The Jills Zeder Group at Coldwell Banker Realty in Miami Beach, also has coordinated requests from high-net-worth tenants. “I often receive the initial call with the complicated requests and then connect the tenants with the property manager, who makes all the arrangements for them,” he said. “They expect the fridge to be stocked and massage therapists, chefs and drivers to be arranged. They also want to know that the landlord has a professional management company that has the resources to respond at 4 a.m. on a Sunday morning for a leaky faucet.”

Mr. Hertzberg said many landlords even do light remodelling between tenants so their properties are in pristine condition.

Leases for high-end rentals can be complicated as well, with tenants demanding unique clauses that may adversely impact the rights of the owners.

Mr. Hertzberg was involved in the sale of a five-bedroom home on Palm Island in Miami Beach where, before signing the listing agreement, the owner rented it to a famous Reggaeton artist for over $100,000 a month. The tenant had his own security team, with multiple guards in front and in back of the property, and they were so protective that even though Mr. Hertzberg had the right to show the property to potential buyers, the guards wouldn’t let them access the premises.

“We lost a lot of buyers because they weren’t willing to jump through hoops,” said Mr. Hertzberg. The tenant allowed access only on certain days and at limited hours. Prospective buyers also had to sign a nondisclosure agreement, which prohibited them from taking photographs.

Ultimately, the parties were able to negotiate a showing when the tenant was out of town, but access for home inspections and the appraisal were a nightmare as well, he said. All inspectors needed to be approved by the tenant and were escorted around the property with the tenant’s security team.

The house was listed for about US$20 million and ultimately sold for about $15 million, Mr. Hertzberg said. “The seller left millions of dollars on the table as a result of the tenant,” he added. “He took a big haircut.”

If you’re the owner of a high-end property and planning to rent it out, here are some things to consider.

Be creative when qualifying the tenant. Owners of ultraluxury properties, or their representatives, need to do more than just a basic credit check and background search on the prospective tenant. Some landlords ask for proof of funds, such as bank statements, as well as personal references from former neighbours or landlords. Others request a letter of credit or that the tenant pay six months or a full year in advance. Ethan Assouline, an agent with Compass in New York City, does all this and more. “If it’s a celebrity, you can also google them and do your due diligence to see if they had past troubles or noise issues,” he said. “Plus, we often know who the broker is on the other side when we’re representing the landlord and the reputation of that broker and the kind of clients they work with.”

Make sure your insurance is sufficient. Landlords of high-end properties should consider securing an umbrella policy, which kicks in when the underlying limits of the landlord’s policy aren’t enough to cover the costs if the landlord is sued for an accident or injury on the property. All landlords of homes that are rented long-term—anything over six months—regardless of the rent level, should have a landlord’s policy, or rental dwelling policy, according to the Insurance Information Institute, an industry trade group. A landlords’ policy provides coverage for physical damage to the property caused by fire or other casualty, as well as coverage for personal property the landlord leaves for tenant use. It also includes liability coverage in the event a tenant or guest is injured on the property. Many landlord’s policies also cover loss of rental income in the event the property can’t be rented while it is being repaired due to damage from a covered loss. Landlord’s policies typically cost about 25% more than a standard homeowners policy for this extra protection.

Do a preoccupancy inspection. While inspections on lower-priced rentals are common when the tenant moves out so the landlord can ensure there are no damages, for high-price rentals, Mr. Schorr recommends a preoccupancy walk-through to protect both parties. “Document everything via video and photographs, and have the tenant sign off on it,” he said. “That way, if a dispute arises, you have a record.”

PARIS —Paris has long been a byword for luxurious living. The traditional components of the upscale home, from parquet floors to elaborate moldings, have their origins here. Yet settling down in just the right address in this low-rise, high-density city may be the greatest luxury of all.

Tradition reigns supreme in Paris real estate, where certain conditions seem set in stone—the western half of the city, on either side of the Seine, has long been more expensive than the east. But in the fashion world’s capital, parts of the housing market are also subject to shifting fads. In the trendy, hilly northeast, a roving cool factor can send prices in this year’s hip neighborhood rising, while last year’s might seem like a sudden bargain.

This week, with the opening of the Olympic Games and the eyes of the world turned toward Paris, The Wall Street Journal looks at the most expensive and desirable areas in the City of Light.

The Most Expensive Arrondissement: the 6th

Known for historic architecture, elegant apartment houses and bohemian street cred, the 6th Arrondissement is Paris’s answer to Manhattan’s West Village. Like its New York counterpart, the 6th’s starving-artist days are long behind it. But the charm that first wooed notable residents like Gertrude Stein and Jean-Paul Sartre is still largely intact, attracting high-minded tourists and deep-pocketed homeowners who can afford its once-edgy, now serene atmosphere.

Le Breton George V Notaires, a Paris notary with an international clientele, says the 6th consistently holds the title of most expensive arrondissement among Paris’s 20 administrative districts, and 2023 was no exception. Last year, average home prices reached $1,428 a square foot—almost 30% higher than the Paris average of $1,100 a square foot.

According to Meilleurs Agents, the Paris real estate appraisal company, the 6th is also home to three of the city’s five most expensive streets. Rue de Furstemberg, a secluded loop between Boulevard Saint-Germain and the Seine, comes in on top, with average prices of $2,454 a square foot as of March 2024.

For more than two decades, Kyle Branum, a 51-year-old attorney, and Kimberly Branum, a 60-year-old retired CEO, have been regular visitors to Paris, opting for apartment rentals and ultimately an ownership interest in an apartment in the city’s 7th Arrondissement, a sedate Left Bank district known for its discreet atmosphere and plutocratic residents.

“The 7th was the only place we stayed,” says Kimberly, “but we spent most of our time in the 6th.”

In 2022, inspired by the strength of the dollar, the Branums decided to fulfil a longstanding dream of buying in Paris. Working with Paris Property Group, they opted for a 1,465-square-foot, three-bedroom in a building dating to the 17th century on a side street in the 6th Arrondissement. They paid $2.7 million for the unit and then spent just over $1 million on the renovation, working with Franco-American visual artist Monte Laster, who also does interiors.

The couple, who live in Santa Barbara, Calif., plan to spend about three months a year in Paris, hosting children and grandchildren, and cooking after forays to local food markets. Their new kitchen, which includes a French stove from luxury appliance brand Lacanche, is Kimberly’s favourite room, she says.

Another American, investor Ashley Maddox, 49, is also considering relocating.

In 2012, the longtime Paris resident bought a dingy, overstuffed 1,765-square-foot apartment in the 6th and started from scratch. She paid $2.5 million and undertook a gut renovation and building improvements for about $800,000. A centrepiece of the home now is the one-time salon, which was turned into an open-plan kitchen and dining area where Maddox and her three children tend to hang out, American-style. Just outside her door are some of the city’s best-known bakeries and cheesemongers, and she is a short walk from the Jardin du Luxembourg, the Left Bank’s premier green space.

“A lot of the majesty of the city is accessible from here,” she says. “It’s so central, it’s bananas.” Now that two of her children are going away to school, she has listed the four-bedroom apartment with Varenne for $5 million.

The Most Expensive Neighbourhoods: Notre-Dame and Invalides

Garrow Kedigian is moving up in the world of Parisian real estate by heading south of the Seine.

During the pandemic, the Canada-born, New York-based interior designer reassessed his life, he says, and decided “I’m not going to wait any longer to have a pied-à-terre in Paris.”

He originally selected a 1,130-square-foot one-bedroom in the trendy 9th Arrondissement, an up-and-coming Right Bank district just below Montmartre. But he soon realised it was too small for his extended stays, not to mention hosting guests from out of town.

After paying about $1.6 million in 2022 and then investing about $55,000 in new decor, he put the unit up for sale in early 2024 and went house-shopping a second time. He ended up in the Invalides quarter of the 7th Arrondissement in the shadow of one Paris’s signature monuments, the golden-domed Hôtel des Invalides, which dates to the 17th century and is fronted by a grand esplanade.

His new neighbourhood vies for Paris’s most expensive with the Notre-Dame quarter in the 4th Arrondissement, centred on a few islands in the Seine behind its namesake cathedral. According to Le Breton, home prices in the Notre-Dame neighbourhood were $1,818 a square foot in 2023, followed by $1,568 a square foot in Invalides.

After breaking even on his Right Bank one-bedroom, Kedigian paid $2.4 million for his new 1,450-square-foot two-bedroom in a late 19th-century building. It has southern exposures, rounded living-room windows and “gorgeous floors,” he says. Kedigian, who bought the new flat through Junot Fine Properties/Knight Frank, plans to spend up to $435,000 on a renovation that will involve restoring the original 12-foot ceiling height in many of the rooms, as well as rescuing the ceilings’ elaborate stucco detailing. He expects to finish in 2025.

Over in the Notre-Dame neighbourhood, Belles demeures de France/Christie’s recently sold a 2,370-square-foot, four-bedroom home for close to the asking price of about $8.6 million, or about $3,630 a square foot. Listing agent Marie-Hélène Lundgreen says this places the unit near the very top of Paris luxury real estate, where prime homes typically sell between $2,530 and $4,040 a square foot.

The Most Expensive Suburb: Neuilly-sur-Seine

The Boulevard Périphérique, the 22-mile ring road that surrounds Paris and its 20 arrondissements, was once a line in the sand for Parisians, who regarded the French capital’s numerous suburbs as something to drive through on their way to and from vacation. The past few decades have seen waves of gentrification beyond the city’s borders, upgrading humble or industrial districts to the north and east into prime residential areas. And it has turned Neuilly-sur-Seine, just northwest of the city, into a luxury compound of first resort.

In 2023, Neuilly’s average home price of $1,092 a square foot made the leafy, stately community Paris’s most expensive suburb.

Longtime residents, Alain and Michèle Bigio, decided this year is the right time to list their 7,730-square-foot, four-bedroom townhouse on a gated Neuilly street.

The couple, now in their mid 70s, completed the home in 1990, two years after they purchased a small parcel of garden from the owners next door for an undisclosed amount. Having relocated from a white-marble château outside Paris, the couple echoed their previous home by using white- and cream-coloured stone in the new four-story build. The Bigios, who will relocate just back over the border in the 16th Arrondissement, have listed the property with Emile Garcin Propriétés for $14.7 million.

The couple raised two adult children here and undertook upgrades in their empty-nester years—most recently, an indoor pool in the basement and a new elevator.

The cool, pale interiors give way to dark and sardonic images in the former staff’s quarters in the basement where Alain works on his hobby—surreal and satirical paintings, whose risqué content means that his wife prefers they stay downstairs. “I’m not a painter,” he says. “But I paint.”

The Trendiest Arrondissement: the 9th

French interior designer Julie Hamon is theatre royalty. Her grandfather was playwright Jean Anouilh, a giant of 20th-century French literature, and her sister is actress Gwendoline Hamon. The 52-year-old, who divides her time between Paris and the U.K., still remembers when the city’s 9th Arrondissement, where she and her husband bought their 1,885-square-foot duplex in 2017, was a place to have fun rather than put down roots. Now, the 9th is the place to do both.

The 9th, a largely 19th-century district, is Paris at its most urban. But what it lacks in parks and other green spaces, it makes up with nightlife and a bustling street life. Among Paris’s gentrifying districts, which have been transformed since 2000 from near-slums to the brink of luxury, the 9th has emerged as the clear winner. According to Le Breton, average 2023 home prices here were $1,062 a square foot, while its nearest competitors for the cool crown, the 10th and the 11th, have yet to break $1,011 a square foot.

A co-principal in the Bobo Design Studio, Hamon—whose gut renovation includes a dramatic skylight, a home cinema and air conditioning—still seems surprised at how far her arrondissement has come. “The 9th used to be well known for all the theatres, nightclubs and strip clubs,” she says. “But it was never a place where you wanted to live—now it’s the place to be.”

With their youngest child about to go to college, she and her husband, 52-year-old entrepreneur Guillaume Clignet, decided to list their Paris home for $3.45 million and live in London full-time. Propriétés Parisiennes/Sotheby’s is handling the listing, which has just gone into contract after about six months on the market.

The 9th’s music venues were a draw for 44-year-old American musician and piano dealer, Ronen Segev, who divides his time between Miami and a 1,725-square-foot, two-bedroom in the lower reaches of the arrondissement. Aided by Paris Property Group, Segev purchased the apartment at auction during the pandemic, sight unseen, for $1.69 million. He spent $270,000 on a renovation, knocking down a wall to make a larger salon suitable for home concerts.

During the Olympics, Segev is renting out the space for about $22,850 a week to attendees of the Games. Otherwise, he prefers longer-term sublets to visiting musicians for $32,700 a month.

Most Exclusive Address: Avenue Junot

Hidden in the hilly expanses of the 18th Arrondissement lies a legendary street that, for those in the know, is the city’s most exclusive address. Avenue Junot, a bucolic tree-lined lane, is a fairy-tale version of the city, separate from the gritty bustle that surrounds it.

Homes here rarely come up for sale, and, when they do, they tend to be off-market, or sold before they can be listed. Martine Kuperfis—whose Paris-based Junot Group real-estate company is named for the street—says the most expensive units here are penthouses with views over the whole of the city.

In 2021, her agency sold a 3,230-square-foot triplex apartment, with a 1,400-square-foot terrace, for $8.5 million. At about $2,630 a square foot, that is three times the current average price in the whole of the 18th.

Among its current Junot listings is a 1930s 1,220-square-foot townhouse on the avenue’s cobblestone extension, with an asking price of $2.8 million.