Buying Real Estate Out of State
When buying any real estate, whether it is next door or across the country, you have to plan, research, and investigate. We have all heard the phrase “if you don’t plan, you plan to fail”, and it’s very true. If you don’t have a goal and a plan how are you going to get there? Before you even begin to look at real estate markets know what your spending limits are. Hire a mortgage banker to help you with the financials and get pre-approved. In most markets it is favorable if you have a pre-approval before submitting an offer. Also, set a time line so you have a reference point to refer to. Depending on the length of your project or your availability set a time line between 2-6 months, from start to finish.
When everything is planned you can start to research the real estate market. If haven’t picked out a specific state try looking for states that are experiencing high residential growth. Just do a simple internet search of the fastest growing counties or states in the country. If you prefer you can hire a real estate agent to do this research for you. This should give you a good idea of where to look. Real estate hot spots are everywhere and they are easy to find. After you have chosen a state, choose a county, and then choose a neighborhood you like. This is where the real research begins.
At this point you are going to want to crawl the neighborhood that you have chosen. You should know this neighborhood as well as your own by the time you are done with the research. Find out what kind of schools are around, stores, distance from highways and other major roadways, etc. What kind of people live in the neighborhood? Families, seniors, 20 somethings?you are an investor look for neighborhoods that are on the rise. If a lot of homes have been remodeled in the area and you can find one that hasn’t you might be able to get a bargain. Find out where the homes for sale are. Sometimes 3 or 4 houses will be for sale on one block, while other blocks have only 1or 2 for sale. Some have none for sale.
After you find out what homes are for sale choose 5-10 of your favorites and write them on a list. For each home you should find out what the comparable home sales and comparable home prices are. Just from searching homes for sale you should have a pretty good idea of what the comparable home prices are. It is also beneficial to check the fair market value (FMV) for the neighborhood. Most homes tend to sell for FMV or what is equivalent to the median sales price. The reason you should check comparable home sales too is to find out what the homes in the area actually sold for. Most homes do not sell for the list price so do not be fooled.
Other than neighborhood data you have to collect information about the homes you are interested in. Price per square foot, taxes, year built, type of construction, sewage system details, and condition of the home are some excellent things to find out. There are thousands of things you can find out. Just think of it as your future home, you should know everything about it. Visit the local tax assessors website to view parcel details about the homes you are interested. The parcels tell you the lot size, taxes, heating system, flood zones, and more. Most times you can access this information on line or have it faxed to you.
After you have fully researched the neighborhood and the homes, pack your bags and get ready for a trip. If you are looking in another state plan to spend at least 3 days investigating. Make all of your appointments to see the homes before you leave. When you arrive at your destination you should be able to start looking right away. Typically it is good to spend a day checking out the town for yourself and verifying the information you learned while at home. Find out what the major traffic patterns are, where the hospital is, the schools, libraries, restaurants, etc. On the second and third day you should visit each home.
Although it may seem like you know everything about the property from your research it is essential that you visit it at least once before making an offer. Sometimes things aren’t what they seem to be. You don’t want to buy a house only to find that it is infested with termites or that the entire roof needs to be replaced. For investors this can be really frustrating. Take pictures, with the permission of the owner, for future reference. If you can’t take pictures note everything you see. After seeing two or three houses you will find that you can’t remember specific details about each home. It is very beneficial later on to have those notes. If you can visit the homes a second time before you leave then by all means do. Narrow your search down to the top 5 and go see them again. This time get a clear picture on the pro’s and con’s of each home.
When you get home look through the information you collected before and during your trip. Analyze what properties are the best for you and prepare to submit an offer. Some sellers will let you submit an offer directly, while others will request that you submit an offer with a real estate agent. If you don’t have an agent use theirs. Prepare 3-5 offers and submit them respectively. The more offers you submit the more yes, yes, yes you will get. Some offers will be countered with an offer from the seller. At this point you can either define the terms, counter-counter the offer, or just pass.
Use these tips anytime you are buying real estate. Knowledge is the key. Learn as much as you can before you travel and absorb as much as you can while there. Good luck!
