So you’re thinking of buying a house in a different city or state than where you live? Maybe you’re planning to relocate in the near future for a job, or you want to invest in some rental property that’s more affordable than where you currently live. While buying property remotely comes with its own set of challenges, with the right planning and approach you’ll be able to make the best decision for you. Here are some tips for long-distance home ownership:
If you’re buying a home to live in yourself:
Familiarize yourself with the area
Lee Huffman, a managing partner at DLH Partners, recommends visiting potential neighborhoods at different times of the day to get a feel for what the community is like. “Ask yourself: Do people keep their yards looking nice? Are the houses maintained properly? Are there cars parked on the yard or are they up on blocks? Is there trash that isn’t picked up?”
If you plan on buying the house as a primary residence, you’ll need to determine whether the neighborhood is not only a good fit for your family and is close to amenities (i.e., schools, your work, hospitals, parks, shopping and entertainment centers) that enhance your life, but you’ll also need to figure out whether sits right with you emotionally. Do you get excited living there? Does it feel right? Can you picture yourself calling it home?
If you have friends or family who live in the area, ask them a few questions about certain neighborhoods. If you’re a member of a credit union, you can also reach out to a branch located in the area you’re looking to buy to help you learn about the lending process, mortgage options, or just gain insight on particular neighborhoods.
Have your documents in order
To get approval for a primary residence mortgage, you’ll need to provide adequate proof that you’re going to move there. So if you plan on moving there for a job, you could send them a copy of your job offer. The requirements depend on the lender, so do your homework well beforehand.
Rent first before purchasing a home
Because the transaction costs in buying and selling a home are so high, Paula Pant of AffordAnything.com, who is an expert in buy-and-hold real estate investing, suggests renting in the new area before purchasing a home. “Because it’s an investment that’s not easily liquidable, spend six months getting to know the place,” recommends Pant. If you’re not in a rush, renting beforehand will give you time to do in-person research and really get to know an area before making a decision. It will also be less costly than having to travel back and forth in doing your research.
Have an exit plan
Have an exit plan if you need to sell or rent your home, suggests Elizabeth Colegrove of TheReluctantLandlord.com. In case you need to move for some reason, spend some time thinking what would be the best route for you to take and the time and costs involved. “For us we never buy a house that would not make a great rental from Day One,” says Colegrove. “That way our house is never a financial burden as we can rent it out.”
If you’re buying to use as a rental property:
Narrow down your search
Pant recommends narrowing your search as much as possible so you can do a proper analysis and crunch the numbers to figure out if it’s a worthwhile investment. “Shop one ZIP code at a time, and really get to know that area,” suggests Pant. Will you be purchasing a property to use as a buy-and-hold rental property to use for cash flow, or if you plan on money into renovating and flipping it? Are you interested in a single-family or a multi-family home? Are you looking to buy property in a lower-income neighborhood that bears more risk, or a more upscale one?
Knowing exactly what you intend to do with the property will help you figure how much money you’ll need to save as a down payment and any repairs, and what kind of loan to apply for. If you’re using it as a rental property from the get-go, look into the qualifications and requirements for a real estate investor loan or non-owner occupied (NOO) mortgage. NOO mortgages usually have higher interest rates and a higher required percentage for a down payment.
Look into the additional costs of owning remotely
While you may be shopping around in an area that’s more affordable than where you currently live, learn about the additional costs of owning a home, such as hiring a property manager, any traveling you’ll have to do back and forth, and the difference in interest rates for the mortgage, insurance, and associated costs for a property that’s out-of-state. You’ll also want to learn about the ins and outs of the rules and regulations of a particular area, too. Spend some time doing a cost-benefit analysis to figure out if the time and money you’ll be putting into it is worth it.
Build your team beforehand
While it may be tricky to know, do your due diligence online and read reviews as to who you’d like to work with when it comes to realtors, property managers, insurance agents, contractors, and handymen. Having a team beforehand will help make remote home ownership a bit smoother. If you have friends or family who live in the area and own homes, ask them for referrals.
Huffman suggests that when you’re in town to arrange meetings with real estate professionals. “Make your visit as productive as possible by coming prepared with a list of questions tailored to each profession,” says Huffman, “but also get their opinions and recommendations for communities, schools, shopping, and entertainment.”
While it can seem daunting, being prepared and doing your homework beforehand will help you navigate through the unfamiliar waters of remote home ownership. With a little bit of help and knowledge, you’ll be on your way to buying a home in no time.