As a real estate investor, having a broad property portfolio is a goal you should always strive for. This means that your business is growing and that you are getting a decent return on investment. Buying a home in a different state can boost your returns and expand your rental income fairly quickly. As a rule of thumb, any investment property should bring in a positive rate of return.
In this article, we will walk you through the process of finding and investing in profitable income properties out of state.
Why Should You Buy a House in Another State?
Property acquisition is a distressing action for many, with most opting not to do it. It involves paperwork, meetings, and value propositions. This, however, can turn out not to be everyone’s cup of coffee. But you can make your journey easier, as your goal is to find a property worth investing in with a high possibility to bring returns. This can drive you to buy property out of your residential state, after a better deal.
Different property rules exist in different states. Hawaii has an effective property tax of .30%, while New Jersey will ask for 2.21%. The same goes for the most southern states, which ask for around 1%. This analytic fact can make or take your expected cash on cash return. Investing in a different state than you are in is a positive business decision to boost your portfolio. It will give you a positive property cash flow of your new income property.
Buying a House Out of State: The Steps
So back to the question: how to buy a house in a different state? Here are the steps you need to follow when buying a home in another state.
Research the Region You Would Like to Buy a Property
Conducting thorough research on the promising properties in the state of choice is paramount. It will help you understand the market and the general area amenities that may suit you. Your selection will be based on the available amenities. Look for properties near schools and parks, roads, and airports. These comps are the basis on which you will decide when buying a house out of state. You can access this information:
- State/City website-different cities have municipal websites and information centers. You can find the different properties in the area, their history, and their status.
- Local News-broadcasts on property ads, developments, and communal amenities. You can learn a lot about the trending events in the town from local news. This will make you understand the culture and tradition of the people more.
- Google search-look for what areas in the city are best for residential property and can generate rental income for you.
- Social media people are always happy to talk about themselves and where they live. Make friends in groups residing in that neighborhood. See what they are talking about-t will give you the general aura of the area.
Remember that you are not buying a house out of state but an income-generating property. That said, a sound decision is a minimum as you weigh your options. Real estate comps are a pillar in your property investment journey.
Make Acquaintances With Residents
Get to know the people living in the area that you are looking into buying a home. You will be surprised how far a smile and a friendly face can get you. You will be able to learn the metrics of the area, like what works and what they like or dislike about the block. You may find a good location for cheap money, but a homelessness problem can deter it from pulling in needed rental income.
Highlight information from the community social media groups. You can introduce yourself as a possible home buyer and ask for suggestions from the members. People are kind, at least. A lot of the small details are exposed, which you may have missed checking out the home. Take the comments and advice, sieving it to measure the viability of the investment to your goals.
Seek a Relocation Expert
A relocation expert handles guiding you through the hustle of looking for a suitable location that can host you. They are useful, especially if you don’t have the time to look into the different property amenities in the area. Send them to check for home proximity to transportation, schools, parks, shopping centers, and the like.
Your rental return margin is dependent on these property characteristics. They need to be accessible from your property with ease. Tenants want a house near basic amenities. They want easy access to the grocery store or the bus station to work. Narrate your property vision and mission to the relocation agent. With this information, they will find you a house that is closely related, if not a replica of what you envision.
Find a Buyer’s Agent
A buyer’s agent is a real estate expert that will guide you through the home buying process. Unlike a real estate broker, a buyer’s agent works for the buyer. He has a moral and legal obligation to act in your best interests. That means he attends open houses and negotiates a better deal for you. His drive is your satisfaction, not the commission he gets after the sale like a broker. A listing agent has a fiduciary obligation to the seller, not you.
Additionally, a buyer’s agent can recommend to you other professionals that you will need, e.g., a property attorney, home inspector, or a moving company, should the need arise. He will also offer help in overcoming challenges along the buying process. Find an experienced realtor practicing as a real estate buyer’s agent in the neighborhood you want to buy a house. Plus, you don’t have to worry about payment. A buyer’s agent and the seller’s agent are paid from the sale commission by the property seller.
Tour the Property
Seeing is believing. Nothing beats a physical tour of the property when buying a house out of state. If a physical visit is not possible, ask for as many photos and videos as possible. This will allow you to see what the house facade is like, if the sizing and internal fissures are okay with you, the sizing, etc. A house may look good on the outside but have a lousy floor finish or a leaking roof. Always look for properties that are going to cost less or zero to revamp into livable space.
Remember your cash flow is determined by the buying price of the property and the expenses. Minimal repairs translate to a smaller negative on the income you make later on. You can ask your realtor or buyer’s agent to take the pictures for you.
These days, webcams and virtual tours are a thing. Take advantage and zoom in to those corners. You might notice something really good or completely off with the building.
Explore Your Financial Options
Buying a new home is daunting, more so if you are chattering freshwaters in a different state. Having the right financial partner will go a long way in ensuring that you get an easier time when securing the deal.
Assuming that this is not your first buy, you don’t qualify for government loans like FHA. Therefore, your viable options are mortgage lenders. Some mortgage lenders need a borrower to have stayed in the state for at least two years. You can mitigate this in two ways:
- Renting in the new state until you achieve this threshold
- Choosing a financial partner who doesn’t have that capping
Naturally, no capping works better, right?
A mortgage lender who understands your situation is the best option. Get a mortgage from the new state, and mitigate the ropes of the legal jurisprudence that may arise from buying a house out of state.
Another glance you may want to take is the total living expenses of the area. Different cities have different lifestyles, and you cannot compare New York with Alabama. Explore what the costs are for transport, food, and utilities.
Look Into Area Home Sales.
Home sales are invaluable when it comes to buying a home. You can know which houses are on offer, their listing price, and amenities. You can build a list of all the possible homes and therefore have an easier time deciding which houses to visit.
Using Mashvisor’s property finder will ease your property search and make it a painless process. The tool uses AI to quickly compute and analyze the given feed, like locality and type of house you want. It aligns with your set budget giving you properties closest to your description but still falls into the budget. More filters see you select the number of bedrooms and bathrooms you want your new property to have. The tool will give you a list of properties on sale, and you can choose which fancy your taste.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Know the New State’s Property Laws
Real estate laws vary from state to state. Homeowners associations may also have different governing laws in your new state. Digest the new rules and regulations to see if you can accommodate them. Ask yourself what effect they will have on your rental objectives, for example. Familiarize yourself with the zoning laws, building codes, property lines, etc.
Take a note of the homeowners’ association rules on having rental properties in the area too. Some HOAs don’t allow secondary home dwellers, which will be trouble should you choose to start an Airbnb business.
An attorney specializing in real estate law will go a long way to hold your hand in the right direction and offer options and advice on matters of law and regulations. The last thing you want is to cross the law as an investor buying a house out of state.
Build a Dependable Property Team
By now, you have a strong buyer’s agent, a relocation agent to help with scouting the area, an attorney to handle the legal perspective, and a mortgage lender to finance the buy. Also, you must now have had a home inspection underway, or are planning for one from that inspector your buyer’s agent recommended.
Ensure that your team can collaborate well and give you the desired outcome. For even faster results, a property finder can narrow your search and act like a relocation specialist. It gives you the specs you need to choose your next real estate venture. Teamwork in a project is essential as it can build your home faster or make the process as slow as if you are doing it alone. Buying a house out of state is simplified when all wheels in your cart are moving with synergy.
Work With a Top-Rated Title Agency
A title agency will provide you with the ownership search of the property you want to buy. It is a risky business to start a transaction without knowing for sure who the owner of the property is. Create credibility around the home by working with a reputable agent to produce an owner’s title. The owner’s title prevents you from being duped by crooks who masquerade the property ownership.
You can get a lender’s title, which safeguards your mortgage provider’s investment. You can buy a clean property that has no debts from the original owner. The titles also come in handy should a claim come up in the future on the ownership of the property. You can consider taking title insurance to protect you and your lender from making losses from defective properties.
Property investment is profitable if you have a good number of houses bringing in decent and consistent income. You can expand your portfolio if you choose to look into other properties, even in different states. A good real estate agent can guide you on how to buy a house out of state and generate profits from it. In the meantime, make sure to get a reliable analytic look at the area you seek to invest in using Mashvisor’s property finder.