From knowing the local real estate market to navigating a whole new tax system, there is a lot to consider and be aware of when buying out of state. It’s worth it, though, as many investors profit from expanding their portfolios and knowledge of other places. The Highlands-Cashiers plateau of Western North Carolina is a popular region on the United States’ east coast. The weather is ideal and the natural landscape is pure, unfiltered beauty. If you’re thinking about buying an investment property out of state, we have some luxurious homes for sale in Cashiers, Highlands, Sapphire Valley, Lake Glenville, Lake Toxaway and Burlingame. Let us know what you’re looking for and we’ll get to work helping you find an investment property that checks off the boxes on your wish list! Things to consider when buying an investment property out of state include:
● State laws and taxes
● Property management
Make the most of your out of state property transaction by following the guide below.
Why Buy an Investment Property Out Of State
The number one reason for a real estate investor to buy property out of state is affordability. If the state of the main residence is of high property costs, the cash injection needed for buying a real estate investment property may involve injecting more money than is necessary for a sound investment. Another reason people consider buying investment property out of state is the return on investment. The return on investment (ROI) or cash on cash return can vary from state to state.
Some investors look at the following things:
● Purchase prices
● Mortgage expense
● Housing regulations
● Rental Market
You may also want to buy an investment property out of state if the current area of residence is in a stage of decline or depression. There are times when the city of residence does not hold viability for investment. If the current residence is taken in an area of reduction, there would be no viable financial reason for investment. At this point, out of state investment would be a smart move in the right direction.
How Do You Know You’re Ready To Buy An Investment Property Out Of State?
There’s more to buying an investment property out of state than just being able to afford it. There are a few things to notice that one should take into account when it comes to figuring out how to know if you are ready to buy an investment property. The first thing should be the financial stability and cash flow of the investor. There should be a ready amount of finances available, and not just for the property, but also to cover any additional costs that may be incurred in another state.
Being mentally prepared also plays a huge role in the readiness of a potential investor. There will be times when the investment needs to be managed, and as the investor takes residence in a different state, specific difficulties could arise.
There are, of course, a few final things that should be mentioned. Being as educated as possible on the subject of out of state investment will be more than beneficial. The worst thing that can happen during an investment is a cost or regulation arising that was not initially apparent. Support is also essential when it comes to buying an investment property out of state. Having a support network, either on a personal or professional level, can make investment transitions easier.
How Do You Buy A Rental Property Out Of State?
One of the initial points of contact when it comes to helping you buy an investment property out of state is to contact a Realtor. There will, of course, be significant differences in the type of Realtor you are looking to deal with as your investment is out of state. For out of state investments, the investor would be looking at finding a Realtor that deals in remote real estate. This will, in itself, take some research as the initial viewing of properties may be of a digital nature only.
Also, one thing an investor should consider when it comes to buying an investment property is to find, research and hire a property management company. You should do this especially if you plan on renting out the property.
A rental management company will protect your investment, and take care of things like:
● Filling the property with renters
● Collecting rent
● Making repairs
● Handling emergencies
Do I Pay Taxes On Rental Income From Another State?
When it comes to paying tax on rental income for any investment property you buy from another state, then yes, the tax must be paid. If revenue is generated from a rental property out of state, all investors will need to file a nonresident state income tax return. This tax return will need to be recorded in the state of the investment property.
There is also a secondary requirement that needs to be fulfilled. The income needs to be declared on a resident state income tax form. Of course, you will be credited in your home state for any tax payments that are made in the nonresident state.
How Do I Buy My First Investment Property?
The first thing that would need to be placed into motion is financing the investment. The investment may be made from cash savings. You’ll also need to secure a mortgage. Before looking at a property, a mortgage calculator should be used, and at least a preapproval for an affordable mortgage should be in place. Having this pre-approval in place allows the potential investor to scan the market to find an appropriately priced property. When they find the property, the investor would then look to employ the help of a remote real estate agent in order to assist them in their search.
When it comes to buying your first investment property, there are a few specific self-requirements you must take note of. Ensuring that you can meet the needs from the following list is a fantastic starting point in figuring out how to buy your first investment property:
1. Have your mortgage ready
2. Buy single-family homes rather than invest in multiple occupational properties
3. Focus on the return on investment
4. Know your strategy
5. Only purchase what you know
6. Research the area
7. Find out about the neighbors
8. Find a property with great outdoor space
Taking the above steps can really help ensure the investment goes smoothly.
How Can I Buy An Investment Property With No Money Down?
One thing most investors do not realize is that it is possible to purchase an investment property without putting any money down. Below are just a few options when it comes to a no money down investment:
● Price incorporation. Depending on the investor and if they have a remarkable credit history, there are some lenders out there that will, in fact, allow financing of 100% of the total purchase price. This, of course, does come with certain negatives. The interest rate on the repayments will be a lot higher. This option is not really viable for investors who hold the intention of renting out the property.
● Foreclosure advantage. Foreclosure advantage is becoming increasingly popular at the moment. The process involves a property due for foreclosure and its current owner transferring the mortgage to the buyer. It can be a complicated process, but ultimately very cost-efficient.
● Find an investor. Another popular option among those who don’t have the opportunity to put money down is to find an investment partner. This also works well for the resale market. It is merely a matter of an agreeable turnover price for both parties at the end of the investment and sale process.
● Negotiate a separate plan. Negotiating a different payment plan for the down payment is an excellent way for any investor to avoid the initial money down payment. This option doesn’t have the rate hits of the 100% finance, and the cash down negotiation sits on a different contract. This is one of the best options for no money down investing in renting.
What to Know Before You Buy Out of State
There is, of course, much to take into account before you buy an investment property out of state. The first thing that an investor should never do is blindly purchase a property. Blind purchases can spell absolute disaster and are surprisingly common. Even if there is a lot of research done into the property, 90% of the time, online records are out of date. Finding a respected and trustworthy Realtor is essential, too. The property should always be examined by the investor to ensure there are no health code violations, and everything is precisely as it should be. The investor should also take it upon themselves to become up to speed with state laws and anything else they should know about owning a property in that state. In addition, visiting the location will help you build better relationships with the people who will be assisting you during the investment process. While on these visits, it’s a good idea to contact local mortgage lenders to get your pre-approvals ready for your investment.
How Much Does a Home Cost in North Carolina?
When it comes to robustness and steady economic growth, North Carolina is a prime example of a state to look out for when you come to buy an investment property out of state. The median home price in North Carolina is sitting comfortably at around $186,000 as of the middle of 2019. This is remarkable as the housing market’s single-year percentage climb is seated at 7.1% with a projected 3.9% growth over the next 12 months. There has not been a point of decline, and over the last two years, the incline has been steady.
Buying a home in North Carolina could be the ideal opportunity for any potential investor. Based on the projection over the next two years, the market could see your investment being made very wisely. North Carolina also has appeal when it comes to the cost of living, so all in all, an investment property here is an incredible move.
Is an Attorney Required to Buy an Investment Property in NC?
When it comes to buying an investment property out of state, North Carolina does require the involvement of an attorney when it comes to closing a property. This should never be deemed a negative thing.
Buying a property can be a huge thing, buying an investment property in a different state; however, it can be even more significant. There are so many things that can go wrong and so much that the investor probably won’t know. By having the involvement of an attorney, the investor is offering protection to themselves and to their investment.
There are also state laws in North Carolina that help to protect the buyer, so having an attorney by your side to guide you through the monitoring of these is pretty vital. The details which are to be presented to the buyer from the seller, via the attorney are:
• Electric and plumbing defects
• Water supply source and disposal
• A pest infestation, asbestos reports, and contaminations
• Homeowner association fees
• Property specifics
It is also good to have an attorney on hand should the property have been built pre 1978. Certain disclosures should be made regarding lead-based paint. The seller is always expected to disclose to you everything that they know about, and an attorney will guide you through the process should there be any difficulty.
Any newly built property or a home that has never been inhabited is exempt from such checks.
Challenges with Buying Out of State
There are, of course, a plethora of problems that can occur when you come to buy an investment property out of state. The first among these is the lack of knowledge of the area and property itself. It is credible to assume that not much if anything, will be known about the location or property. So knowing what exactly to look out for in a new state can be difficult. This can, of course, be remedied with a lot of research and frequent visits to the intended place of investment. By taking these steps, the investor then becomes acquainted with the current area, and investment becomes a little more straightforward.
Another issue that presents itself is the regulations. Each state holds its own set of regulations for properties, and knowing them all would be quite a feat. Most investors are only loosely familiar with the regulations in their residential state. This is why it is always best to have some form of a legal body on your side. Having the accompaniment of an attorney to tackle and iron out any issues that may come with state-based regulation will always reduce stress and purchase challenges.
Dealing with issues in a timely manner can also pose a challenge when it comes to buying an investment property out of state. The investor, of course, takes up residence in a different state, so any time a problem presents itself, dealing with it can be quite a challenge. These challenges can also present should the property go through the rental process. Managing tenants, whilst in another state, can be an almost impossible task. This is why, as mentioned earlier, a property management company would be essential.
What to Look for in an Investment Property
There are, of course, several things any investor should be looking out for. These things should be noted when they come to buy an investment property out of state or to purchase any property for that matter. These are only a few of those things:
• Property taxes. Dependant on the state the potential investment opportunity lies in, and the property taxes are very likely to vary in quite significant amounts. You will want to conduct a fair amount of research when looking for your investment property. This will allow you to preempt just how much potential income you could lose to the tax of the nonresident state. Taxation of high priority in a good neighborhood can, in fact, attract long term tenants, so can be a positive thing. A visit to the location of investment and a chat with some of the existing residents will help you get a feel of the taxation of the prospective investment area. Alternatively, the local assessment office will provide you with all of the information required.
• Further developments. Paying a visit to the local planning department of the area should always be one of the first port of calls for the investor. Future developments can hinder a lot when it comes to an investment. If the development of something like a mall were to happen in the close vicinity. A development like this could drive any potential tenants away from the property. However, depending on the development, it could potentially add value to the investment in the long run.
• Crime. This is such an incredibly important thing to pay attention to before investing. Paying a visit to the local public library will have crime statistics for the zip code of the investment property. The investor should look carefully at what crimes have been committed and whether there are increase/decrease patterns its occurrence.
• Neighborhood. Researching the neighborhood is vital when it comes to investing in any property. Conducting thorough research on the neighborhood will help you see what kind of tenants you can expect, and if there is a current demand for the area. Areas in high residency demand often see higher than predicted rental prices. Of course, the opposite can occur if there are a higher number of vacant properties.
• Employment market. Another incredibly important thing to pay attention to is the working market of the area. Having access to local employment can present the opportunity of more tenants, alternatively produce an opportunity for existing tenants. The likelihood of a tenant maintaining more extended residence, the property, when employed locally is far greater than if they are employed out of town. Taking note of the type of work possibilities in the local area will also help you to determine the type of tenant you may get.
• Natural Disasters. Natural disasters can occur anywhere in the world, but some happen with a seasonal pattern. Looking into a history of extreme weather and earthquakes is a must, especially when it comes to protecting your investment.
Generally, there is so much to take into account and so much to look out for. Some of it comes down to investment area specifics, and other comes down to personal requirements. The main things that should be looked at for a first time out of state investment property is simply something with the lowest maintenance and the best financial turnaround. Single-family dwellings are always going to be the ideal opportunity for any first-time investor who is looking to buy an investment property out of state.
Single-family dwellings more often than not attract long term tenants, which of course for the investor presents less stress of having to accommodate the property to often. Families are usually more reliable when it comes to rental payments too.
The number one thing to pay attention to when it comes to a rental property is never to pay more than the annual rent you expect multiplied by twelve.
Benefits of Buying Investment Property Out of State
There are, of course, many countable benefits when an investor comes to buy an investment property out of state. Of course, for most investors who choose to invest out of state, it is initially due to their resident state prices being too high.
Buying an investment property out of state can itself present cheaper investment opportunities. When the opportunities locally are priced way too high, buying out of state will always make financial sense. Property prices will generally correlate with the location. The first thing an investor should consider doing is a cross-state market analysis. Doing this analysis will allow the investor to identify profitable properties for sale.
If the investor is, in fact, a seasoned property investor, they may already have properties already in the current state. The reason for investing and buying a property out of state may be to extend the existing portfolio. Holding property interest in more than one location can be a financially sound way to perform business. If the property is held in multiple states, the risk of loss should one economy see a sudden decline would not be as significant. Owning financial interest elsewhere can support a temporary slump and keep your portfolio afloat.
With an investment property out of state, you can design a whole new rental strategy that suits the investment best. Whether you opt for a long term strategy and aim for the family dwelling accommodation, or you are enticed by a condo investment, and you intend for short term tenants. Either approach may work for you and finding what does will always be beneficial in the long run.
Of course, the most significant benefits when it comes out of state investment is the profit you can make. In general, the main reason for buying an investment property out of state is always going to be the return on investment. Once the right location has been sourced, the property itself will be more profitable in terms of the ROI, cap rate, and rental income.
Things to Know Before Buying an Investment Property Out of State
As previously mentioned, there are always extra considerations when it comes to buying an investment property out of state. The first thing you should become familiar with is the market. Having advanced knowledge of the local market is absolutely essential when it comes to investment. You will lack any of the experience that a state resident investor would have so you should get to know the following things:
• The neighborhood - You should know the ideal streets for residence.
• Economic trends - Become familiar with how the local population has changed.
• Local politics - Understanding what is and what might be.
Something we have also looked at previously is knowledge of the local laws. As a homeowner, you may be familiar with what is involved when it comes to purchasing or renting a property in your home state. As we had touched on very briefly, real estate regulations vary county to county and also between states. You don’t have to worry yourself about knowing the details of every regulation and law, find a property manager. Finding a property manager is something we have also touched on previously. Property managers are, in fact, invaluable in making sure that your out of state investment process runs as smoothly as possible.
The final thing to know when it comes to buying and investment property out of state is how much time can you spare. As an investor, this may be just a step into extending your existing portfolio, and you are going to have the property managed by a property management company. You may, however, want to manage this property yourself, doing so can take a lot of time and effort. Doing so should come with extra considerations for:
Although they may seem obvious, managing the property yourself can be quite an expensive task. Self-management presents extra costs, especially if flights are required every time you need to visit the property. Taking on the property management yourself can also present risks should there be a problem with the property. All in all, self-management of an out of state property can be quite the task.
Buying North Carolina Mountain Homes
When it comes to property investment, there can be nothing more appealing than a North Carolina mountain home. The state has an incredible mountain region with some fantastic investment opportunities. On top of being absolutely beautiful, North Carolina boasts a strong economy and a high employability rate. Buying an investment property in North Carolina grants more than can be expected. Any prospective tenant you may find will have access to fantastic mountain vistas, friendly culture, incredible food, and just about the most beautiful people on earth for neighbors.
Buying a Home in North Carolina with Landmark
When you come to buy an investment property out of state Landmark Realty Group should be your main port of call. When it comes to experienced and professional realtors, they are the go-to company. Landmark has many years of experience and an incredible vision. Landmark Realty Group wants to be able to offer the best in escapes, and there is no better place for this than North Carolina. Landmark Realty Group can aid you in all of your requirements from ownership to rentals and even property management.