Investing in a Property Sight Unseen: What You Need to Know
Rising mortgage rates and higher home prices are deterring a lot of people from buying a home, but for investors; it’s business as usual. During the recent frenzy of people buying up whatever was available, a number of investors from different geographic regions decided to buy properties even without seeing them. Buying a property sight unseen might have seemed ridiculously risky years ago. But now, thanks to technology, it’s not too difficult.
When you’re thinking about investing in a different market, you may not get the opportunity to see a property for yourself. As long as you have a great local team, including a real estate agent and a property manager, you can buy a property virtually.
Let’s take a look at the risks and the rewards of this kind of investment, and what you need to know about how the process will work.
First, Secure Your Financing
You need to have your money in order before you think about buying an investment property sight unseen. You’ll have trouble getting anyone in another state to take you seriously if you show up with questions but no money.
If you’re paying in cash: great. That’s going to put you in a stronger position to negotiate with sellers. It also means you don’t have to worry too much about rising interest rates or the cost and hassle of a mortgage.
When you’re financing this investment with a mortgage, you’ll have to get pre-approved as quickly as possible. This will give you an idea of what your budget is. Having this pre approval will help you shop for homes in your price range. You’ll also demonstrate to professionals and sellers that you’re a serious buyer with the means to make an investment.
Understand the Unique Risks and Challenges
How much risk can you tolerate when you’re investing? When you’re investing sight unseen, your biggest risk is that you don’t know the area. You aren’t experienced in the market. You may not understand the supply of properties, nor the demand. It may be difficult to understand where home values fall and what the purchase price will ultimately look like. Local demographics and requirements may take some time to learn.
Mitigating Risks with Local Partners
There’s also the risk of not seeing the property yourself, or being able to walk through it. Video tours and virtual tours can tell you a lot, but when you aren’t standing inside the property and running the water and knocking on the walls, you’re taking some chances.
This is where local property managers and real estate agents can help.
It’s important to partner with professionals. You don’t want to send an acquaintance over to take a quick walk through. You want to know details and specifics, and you want a professional opinion from people who know the industry and the market.
- Choosing a Real Estate Agent
Your best choice will be a local real estate agent who has experience working with out-of-state investors like you. As you move through the process of identifying the right property, making an offer, and closing the deal, you won’t have to worry about not being there. You can rely on your agent to handle the showings (you’ll want them to see the property themselves), the communication with the seller, and the negotiation of purchase price and other terms.
You may have purchased a property without the help of a real estate agent previously but when you’re buying a property sight unseen, having that local professional will make a big difference. The entire process will be less frustrating and less risky.
Expect your agent to:
- Identify potential properties based on your budget and requirements.
- Send you information on these properties, including photos and videos.
- See the property on your behalf. You could potentially be on a video call, or you could send the agent yourself and review their report and recommendations later.
- Recommend an offer and manage the counter offer process and negotiations.
- Represent you at the closing.
With the right real estate partner, you’ll have a local expert who can show you some good options based on your investment needs and your budget.
- Choosing a Property Manager
In addition to a real estate agent, you’ll also want a property manager in Vancouver who can tell you how a particular property will rent. A property manager has a different set of skills than your real estate agent, and a lot of experience in the rental market. With a property manager helping you invest sight unseen, you will have someone who knows:
- How much rent the property you want to buy is likely to earn in rent.
- How much work the property requires before it’s ready for the rental market.
- What vacancy and turnover statistics look like in the market.
- What you’re likely to spend on routine, emergency, and preventative maintenance going forward.
Property managers and real estate agents should work together to deliver an easy investment experience for you. They will provide the eyes and the ears that you need to invest in a property without seeing it.
Have a Thorough Home Inspection
When you buy a property without seeing it and doing your own walk-through, a full inspection is absolutely necessary. Do not skip this step, no matter how quickly you want to move through the process.
A comprehensive property inspection is fundamental when you decide to purchase real estate that you have never seen and will likely never visit. You’ll want to know about any potential problems, especially when we’re talking about an investment property that you’re required to keep habitable and safe.
Your real estate agent and property manager have likely given the home a good look. They’ve checked the systems and the functions to ensure it’s worth your money. A home inspection goes much further and provides you with a documented record of the property’s strengths and challenges. Having an inspection will save you money in the long term and protect you against buying a property that won’t make a good rental. You can’t rent out a home with structural issues.
During the inspection, make sure you’re working with an inspection company that will take a special look at the structure and foundation. This includes the roof, the basement, the walls, floors, and frames. If there are any outbuildings like garages or sheds, you want those inspected, too. You’ll want to have the electrical system checked. The wiring needs to be safe and modern. Outdated wiring is often a problem in older homes. Do all the outlets work? If there are problems, make sure they can be easily fixed.
Are there any problems with the plumbing? Get to know the age of the water heater, the pipes, and any irrigation system outside of the home.
Review the inspection report carefully, and talk about it with your real estate agent and property manager. If the inspection unveils extensive damage, a price adjustment might be in order, or you may want to look elsewhere.
Make an Offer and Close the Deal
The offer process on a home that’s a sight unseen offer won’t be much different than the way you make an offer on a property in the traditional sense. Decide on what you’ll offer, gather your earnest money, and let your real estate agent open the negotiation. Once the seller receives your offer, there may be an immediate acceptance. Or, the seller will reject it or request a change or make a counteroffer. These details will be managed by your agent.
There may be a few more contingencies in your offer when you’re making one sight unseen. You can establish certain criteria before the deal closes. It might be the home inspection or the title search that you want finalized before the deal moves forward. All of these extra protections will ensure you’re not taking on too much risk with this property.
Once you’ve had your offer accepted and all inspections and appraisals have been completed, you’ll close on the home. Sometimes, you can attend the closing virtually, but that may not be necessary. Let your agent handle the closing on your behalf.
This is not as risky as it may seem. Not only do you follow the process almost exactly to the letter as you would with a traditional investment purchase, you’re saving yourself some travel expenses and a lot of time by not flying out to see the property yourself.
The ability to invest in properties and make offers even without seeing the space opens up a lot of doors for investors. You can cast a wider net when you’re looking for new markets to invest in, and you can take some steps to diversify your portfolio by investing in properties you may not have considered earlier.
If you’re thinking about investing in a property but you have no plans to come to the area, we’d be happy to work with you on your purchase. Please contact us at Utmost Property Management. We manage homes for investors like you in Vancouver, Camas and the Greater Clark County area.