Where do I start when buying out of state property?
Im in California and I was wondering where would I start when looking to purchase out of state properties? I was looking in the AZ or NV areas. When I contact people regarding a mortgate rate,they ask if I have a home picked out. If there is a home I'm interested in, they ask if I'm pre-qualified for a loan. When I contact property managers, they ask the same questions as above. Etc. etc. The same question starts every conversation.."Do you have this yet?" Im just curious what would be step # 1 when trying to purchase out of state? Also,should I start an LLC in my home state or the state Im planning on buying property?
Eric
The LLC would need to either be created in the state with the property or registered as a foreign entity in the state with the property. The fees are generally the same.
When you're asking about mortgage rates, you need to be sure you specify its for investment property. Rates are about a point higher for investment property than for owner occupied properties. Be sure to work with a broker who's knowledgeable about investment loans. If all they do are homeowner loans, they won't know the in's and out's of investor loans.
I'd start by researching areas. Find an area where the prices and rents work and where you can find deals.
I'd start with the conversation with PM's as "I'm considering buying in your area. What specific areas do you like."
If you are looking only in those locations, your first step will be to find an area that you want to invest (narrow it down), find out what the rent rates are, and find a property that will bring you the cashflow your looking for.
You should be able to get a mortgage pre-approval without having a property in mind if you talk to the right people at the bank.
Thanks for the input! I was curious who I should contact first literally! Should I get pre approved first? Look for a specific property first? Speak with property managers about rents in the area? Talk to a real estate agent first? Obviously, you have to start somewhere. Then there is that looming question " Do you have(fill in the blank ) yet? Ive looked at many properties and was curious what is the best way to proceed from there?
Eric
I would call and speak with a property manager per Jon's suggestion. Ask what areas rent the fastest, what the rents run, etc. Let them know you are interested in buying rental property in the area, and they should jump at the chance to help you.
Thanks Marc! I will start making some phone calls. I can hear it now..."Do you have a property in mind and financing?" I will take yours and Jons advice and go from there. Thanks again.
Eric, if you are buying, the money has to come from somewhere. Many sellers don't want to waste their time with lookie-loos and people with no hope of ever buying. That's why they want to know where the money is coming from for the purchase.
You'll have better luck getting financing within the area you are considering.
So step one is to decide upon an area of interest.
Then you contact some area banks and tell them you are thinking about buying investment property and ask what they can do for you.
If you like their available loans, you ask to get pre-qualified. They look at your financials and decide that they might be willing to loan you the money, if they like the property that you eventually decide upon.
Now you can show the sellers that you can get the money to pay for the property. So they are willing to show it to you, and to provide some information about it.
Your point is well taken P NW. Obviously,I will purchase property eventually. I was just looking for the exact starting point of the entire process of purchasing out of state properties. Your post as well as the other posts give me a good insight on where to begin. Thanks
Eric -
I'm in Oklahoma and we have many people like yourself from California who bring their money in to invest in our real estate because of the stability of the market.
I have quite a few clients from California who have been absolutely screwed blind by the management companies they have worked with.
What is the norm is that these guys come in and pay way too much for some local guy's junk...
I usually get involved to help solve the problem. Anyway, just be very careful when you go out of state looking for real estate. The tendency is to pay too much and end up with substandard management.
Research County records is what I do. http://www.washoecounty.us/assessor/cama/search.php (for Reno Area). I went there just to do a test run for you and the first name I came up with was a property investment company.
My point is 'just about' everything you need for each area should be on a county website. Property owners information, how many properties each person or company owns, tax info etc.
Dealing with other investors or investor friendly RE professionals works better for me because they are just familiar. It makes it more a run of the mill situation rather than pulling teeth.
As far as money goes... always have your pre-approvals or proof of funds up front and before they ask for 'em.
Letting people know you are an investor doesn't really help up front (for me) as I still get the same questions. Talk to an investor saavy broker and tell him or her you want to get a pre-qual for x amount and let him/her know you are looking to invest (if you have good credit). Cash is King, just show it up front and you should have no worries.
p.s. get to know your area well before investing, extremely low prices should raise an extremely red flag. If you are not sure about an area don't buy until you do your research. Crime rates, eviction rates, etc. If you plan to rehab and rent make sure to screen your management companies and real estate agencies (that manage properties) well for capability. Make sure they can maintain the property as you would if you were present.
I hope that wasn't too much info ;-)
Agree with the above posters comments.
Recommend:
1) narrowing your search to one or two areas. Check employment prospects, vacancy rates, schools, crime etc. Vacancies are an issue in Phoenix and other sun belt areas.
2) travelling there to meet with buyers agents and property managers + get a feel for the town etc
3) check comparable sales on trulia
4) crunch the numbers using the 50% rule
Quiet a few people on here will tell you to stick to an area you know and are familiar with- but they dont live in a completely overpriced market like Cali.
I understand the issue here. In Sydney Australia where i live - avg condo price 400k: avg rent 2k pm for what is considered a good deal - do the maths! You do need to spend the time doing your research thoroughly though.
I am about to purchase my first deal in upstate NY (over 20 hrs from my home) and have met with a good local property manager and just visited the town. Have also spent ages researching the area, vacancies, crime, comparable sales. I am not going to make as much as someone that manages on their own but i am confident i can still do well out of this with a strong team. Cannot stress the importance of this enough.
Interested to hear from BP regulars on their opinions of out of town buying though? (and also some that have successfully made it work!)
I wish you all the best.
Hi,
This is very informative thread. I live in Canada and I was wondering if I were to buy an investment property in US (I was looking at Phoenix area), would I qualify for mortgage in US? I mean do US banks give investment mortgages to foreigners, or do I have to finance the purchase through Canadian bank? If I can get a mortgage from US bank, what would be the minimum downpayment required for foreigh investors?
Thanks,
John
John,
Financing is a challenge. There are a number of other posts on this but to be honest I dont think I have seen many that actually answer this tough question.
Your best options for finance are:
1) seller financing (tough to get but something many sellers in the US will offer if they are desperate enough to sell)
2) equity in your current property
3) find a US lender that will lend to you. Im looking at this at the moment. It is possible but you will pay anywhere between 1-3% premium upon the standard interest rate.
4) hard money lenders
4) cold hard cash
In Aust, banks will not lend you money to acquire an overseas asset. This makes sense - too hard to value, forex issues etc. Assume this would be the same with any other western country. Using equity in your own home is different, as that is the same as cash.
On a side note - do your research on Phoenix. I heard vacancies are high there thats all. Happy to stand corrected. Check out area stats on yahoo real estate, homefinder, homepath stats etc. Of course some may say the same about eastern Ohio (where I am looking) - it is all about doing the research on the particular area you are looking into!
Hope this helps.
Josh
