Buying out of state rental property can be a great real estate investment if you’ve found the right location.
In fact, not limiting yourself to your local real estate options is one of the best things you can do as an investor. There are many incredibly profitable opportunities out there, and sometimes they are on the other side of state lines.
If you’re considering buying property out of state, you may be wondering about getting a loan out of state. While this can seem like an intimidating process, it’s actually much simpler than you might think. In this article, we are going to discuss how to approach investment property financing when buying rental property out of state, including recommendations for mortgage lenders.
3 Ways to Buy Real Estate Out of State
Talk to Your Bank First
Most people have a specific bank or lender they are comfortable working with. Have you asked your bank if they provide out of state investment loans? If so, and the answer is negative, you are probably feeling pretty lost on where to turn.
Many banks are local to certain areas and won’t lend money for out of state rental property if they are not approved to make loans in the state you’re trying to buy in. However, even if your bank does offer financing for out of state rental property, keep other options in mind before making a decision.
Contact Out of State Lenders
Get in touch with out of state mortgage lenders to discuss your options.
The next option you might consider is finding a bank that is local to the out of state rental property. While this option will likely work, because the lender will be legally able to provide the loan, it may not be ideal. Buying a house out of state is complicated enough without dealing with long distance communications and transactions. Being able to meet with your mortgage lender in person is a huge benefit you might not want to forfeit.
On the flip side, having a lender that is local to the area you are buying in could be a major plus. They will have a much deeper understanding of the local market, which could help mitigate risk. Additionally, if you intend on purchasing more out of state rental property in the neighborhood, it could be a good idea to develop a close relationship with a small, local lender. Smaller lenders tend to be more invested in their dealings with real estate investors than large banks, and having a more personal connection could be beneficial.
Work with a National Bank
National banks are the only kinds of banks that will be local to you, local to the area where you are investing, have an understanding of the market you are buying in, and finance long distance real estate investing ventures. The easiest way to ensure hassle-free financing for an out of state rental property is to stick with national mortgage lenders.
The only downside to big banks, as mentioned, is that you might miss out on a more personalized experience. If in the near future, you plan on buying more out of state rental property in the same area, it may be worth looking into local lenders. However, for first-time investors interested in out of state real estate investing, national banks could be a simpler choice.
Related: What to Consider Before Investing in Real Estate Out of State
How to Choose the Right Lender
Before choosing a lender, ask yourself these questions:
- Am I comfortable communicating with and facilitating transactions with a lender I cannot meet in person?
Your answer to this question will help you determine whether or not you need to find an out of state real estate investing lender that also has a branch local to you.
- Am I planning on purchasing an out of state Airbnb property or traditional property?
While rental market analysis is important for both types of out of state rental property investment, Airbnb investors should take particular care to ensure their market is suitable for short term rental properties. Luckily, Mashvisor can help you determine this with our real estate investment tools.
When it comes to choosing the right lender, Airbnb investors might want to consider going with a lender that is local to their target rental market. The added insight local lenders can provide may be extremely helpful.
- Does the lender I’m considering have extensive knowledge of the real estate market in which I’m investing?
Before investing in out of state rental property (or any property for that matter), you must conduct a real estate market analysis. If you need help with market analysis, check out the best real estate investment tool for neighborhood analysis: Mashvisor’s real estate heat map.
Mashvisor’s real estate investment software helps investors make faster and smarter decisions. To learn more about how Mashvisor can help you find profitable investment properties, you can schedule a demo.
That being said, even after cultivating your own market knowledge, it can be helpful to develop close relationships with lenders who understand your target real estate market. The more you know, the more power you have to make successful investment decisions.
Related: How to Choose the Best Mortgage Lenders
Lenders for Out of State Rental Property
If you are on the hunt for a lender that is local to the area where you plan to buy out of state rental property, consult this handy list issued by the US government. It details every lender in the US that is approved to make loans nationwide, including their name, address, city, state, and phone number.
For real estate investors looking to go with national banks, Wells Fargo is one of the biggest names that appear on the list above.
As one of the largest banks in the US, Wells Fargo provides an easy online application process for qualifying for a mortgage, and in order to check their mortgage rates, you’ll have to go through a quick questionnaire. Generally speaking, their rates are highly competitive. Wells Fargo offers a wide range of mortgage products and low down payments, starting at 3%.
See also: Investing in Out of State Rental Property: How to Manage Multiple Out of State Properties
The Takeaway:
The good news is that financing out of state rental property can be done. Unfortunately, there are no hard and fast rules about which lenders are best to use. The right lender for your preferences, circumstances, and investment strategy will be entirely unique to you.
Hopefully, this article will point you in the right direction when choosing a lender you’d like to work with for your out of state rental property.