Author Topic: Buying in a City Where I Don't Live  (Read 2021 times)

HappyHoya

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Buying in a City Where I Don't Live
« on: July 22, 2015, 01:50:29 PM »
Does anyone here have experience buying a property in a city where they don't live, when they don't own their primary residence?

I stumbled into an opportunity to buy a really unique (historic) property that's in a great walkable neighborhood in a nearby major city. It's in a place near where I lived previously, close to family, and en route to other family. It's a place we'd be happy to vacation and where we've already discussed moving for our jobs someday (it would just be a transfer for one of us and lots of opportunity for the other, but it wouldn't be for at least 10 years). In the meantime, we plan to rent it out, with a strong possibility of turning it into a boutique vacation rental. I've read over the HOA policies and they would permit this. I also spoke with neighbors who do this and the rate we would likely get would more than cover the mortgage, even if it's occupied only 60% of the time, giving us plenty of time to enjoy it ourselves. The house is in good condition now (renovated bathrooms and recently repaired and assessed roof), but there's always the possibility of unexpected expenses. With a historic home and an HOA, there are lots of rules about how we would have to maintain the property. Most of them are superficial (paint color and material choices in renovations). Fortunately, there are no rules about who has to do it (unlike a lot of other historic property HOAs), which would save us some money.

My family currently rents in our hometown because that what makes sense for us in our current city. We have a very reasonable apartment we love, and our living expenses would go way up through either a mortgage or transit if we bought in our home city. We live within our means and can afford to take on the 30-year mortgage expenses while continuing to max out two retirement accounts and contributing to other investments. The money that would cover the mortgage would come from other savings accounts. We recently got rid of a lot of student loan debt and had been saving the money with vague ideas about it being for a down payment someday, but hadn't really figured out what to do with it. I'm ambivalent about buying, since I'm not sure it even makes economic sense where we live, but we thought having a down payment saved up would give us freedom to buy if rent were to skyrocket in the future or if we stumbled across an amazing deal in our current city. I don't see us buying in our area for at least 5 years though, since it's so expensive and the inventory is so, so low ATM. The biggest risk I can think of related to buying the other property would be that if we ended up finding something in our current city that was a home we loved, will we wish we had the money we'd poured into the other property? I don't expect we'd have problems selling, but that seems impossible to rely on. The possibility of a passive(ish) income and investment is pretty tempting. Any thoughts?

 

CashFlowDiaries

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Re: Buying in a City Where I Don't Live
« Reply #1 on: July 23, 2015, 10:15:42 AM »
I think purchasing a vacation rental as your first rental could be a little risky.  I would do a lot more research about what kind of actual numbers/returns you would get.  Dont rely on just what those neighbors say.  Talk to realtors, property management companies and try to find other investors doing the same thing in that area and pick their brains.

I can tell you have your heart set on this because of your old home town, close family and a good vacay spot for your and your family but dont fall in love with it just yet.  It can be dangerous when you are buying with your heart and not the actual stats.

Wish I could help you more!

lcmac32

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Re: Buying in a City Where I Don't Live
« Reply #2 on: July 23, 2015, 11:52:01 AM »
How far is the distance to the proposed vacation rental?  This would be a factor, but generally I would say this is a bad idea.  Strictly from a geographic perspective.  I moved across three large states and rented my previous house for two years.  When the renters found a less expensive rental in same neighborhood, they moved. (I don't blame them.).  Two years was enough to realize it is really difficult to manage from that far away.  I even had a good friend who would check on things (he own 7 rentals outright), and make the minor repairs free of charge, but in the end it is too difficult.  I sold after they left, used my equity to get mostly debt free.  I still have a smaller rental in same city.   I would sell it as well, if they right person came along, even having only 6 years left on a 15 year mtg.  From your post, it sounds like you are doing really well right where you are.  Stay the course a year or two more and then see if the vacation rental is still what you want as an investment vehicle.  You will be FIRE soon with or without the rental.

AM43

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Re: Buying in a City Where I Don't Live
« Reply #3 on: July 24, 2015, 08:44:33 AM »
In general I would not recommend buying property out of state or long distance from where you reside.
You mention that property is located in HOA community.
My recommendation is to stay away from places like that.
Of course not all HOA communities are created equal, but generally they all have endless rules and regulations
you have to follow and with rentals its not easy.
Keep in mind that  HOAs are constantly changing Bi-laws and could outlaw rentals all together one day.
There are many variables to consider when purchasing rental properties and buying one long distance I would give it a hard good look.

HappyHoya

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Re: Buying in a City Where I Don't Live
« Reply #4 on: July 26, 2015, 08:25:29 AM »
Thanks for all the thoughtful advice. We've decided that while it's probably a great opportunity for someone, it's too risky for us right now. I'm trying to be patient and continue to grow our stashes to get ready for a different, better opportunity.