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Tips for Handling Homeownership During and After Divorce

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Even though the divorce rate in the U.S. is falling, it’s still common for marriages to end. The emotional cost of such a life-changing event is obviously significant, but the financial impact of a divorce can last for a lifetime as well.

For couples that own a home, the decision about what to do with the house after a divorce comes with both personal and financial questions. Is there a sentimental reason for one spouse to keep the home? Is it best for the children to stay in the school district they are in? Is the house affordable on just one spouse’s income?

That’s why the decision is so difficult. In this article, we’ll break down some of the more important aspects of dealing with homeownership during a divorce.

Why your home is so important in a divorce

A home is usually the biggest asset you will have in your lifetime — and also the one you’re most emotionally attached to.

When couples divorce, they need to split up the money and property they’ve accumulated while married. Dividing up these assets and debts often creates stress and confusion, and disagreements about who should get what. That’s even more true for homes. It may be easy to divvy up the balance of a checking or savings account, but dividing up the equity and outstanding mortgage of a marital home is complicated.

3 ways to handle homeownership in a divorce

There are three common ways to handle homeownership involving a divorce. The option that works best for you will depend on how amicable the relationship remains, and whether or not there are children involved in the divorce.

1) Sell the home.

This is often the simplest way to pay off the mortgage and split the proceeds of the money made from the sale. Each party can use their portion of the equity to purchase another home if they qualify for a new mortgage in the future.

There may be tax implications from the sale, so it’s important to consult with a tax professional to find out how the sale will affect your obligations.

2) Refinance the home and buy out the other spouse.

In cases where divorces include children, one of the spouses will often want to keep the family home. This could be to preserve relationships with neighbors, keep children in a school district or simply for sentimental reasons.

But a house is generally the biggest asset a couple has. If one spouse is going to keep it, that can make it difficult to divide the overall pie equally.

In this case, you’ll often need to use a cash-out refinance to buy out your spouse’s portion of the equity in the home.

A cash-out refinance allows you to get a new mortgage at a higher amount than the current outstanding loan. The difference between the two is paid to you in cash. The amount you can borrow in a cash-out refinance will depend on the loan program you choose.

When evaluating your options, it’s also helpful to know the maximum debt-to-income ratios allowed in a refinanced mortgage. This measures your monthly mortgage payment as a percentage of your overall income. If you bought the house with joint income, you’d need to make sure you can qualify for the new mortgage post-divorce.

Here are three typical refinance loan programs to explore.

Conventional cash-out refinance: The maximum you can borrow will be 80% of the value of the property. The maximum debt-to-income ratio is 45%.

FHA cash-out refinance: You can borrow up to 85% of the value of your home. The debt-to-income ratio is a maximum of 43%.

VA cash-out refinance: If the spouse staying in the house is a veteran, 100% of the value of the property can be refinanced. There is no maximum debt-to-income ratio, but the veteran must be able to show that he or she has enough money left over every month to meet basic needs.

3) Refinance without taking cash out.

In some cases, you might be able to negotiate the division of your assets without having to take any cash out in a refinance. This is a good option if there is very little equity in the home.

Conventional refinancing is often a good fit. If you qualify, here are some “streamline refinance” options that could also work in your situation. They are considered “streamlined” because they often require less documentation.

FHA streamline refinance. This refinancing program is open to people who originally got an FHA mortgage on their home and allows you to remove one of the original borrowers on the loan. However, you need to call your current lender to see if there are restrictions on doing so. There may be requirements for the person staying on the loan to prove they can qualify for the loan on their own.

VA streamline refinance. If a veteran spouse is going to keep the home, it can be streamline refinanced into his or her name. The VA will require a statement from the veteran confirming the ability to qualify on the new loan, especially if the original loan was made with both spouses’ income.

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What you’ll need when you go to refinance during or after a divorce

If you and your soon-to-be ex have a mortgage on your current home, there are some very specific things that you’ll need to do if you plan on keeping your house. Your divorce decree will be the primary document used by underwriters for any mortgages you get in the future.

Mortgage underwriters will use the decree as a guide for what debt is counted against a spouse on a future application, as well as when and how income such as child support and alimony can be used as qualifying income for a new mortgage.

If a lender can’t clearly see that debt belongs to your ex-spouse because it didn’t identify the account number of the creditor’s name, the debt will be counted against you and you’ll qualify for less loan. The tips below can help you avoid that scenario.

  • Make sure you know every account you have. Every open credit card, every car loan and every real estate asset should be listed on the divorce decree. As the divorce process begins, it’s a good idea to get a “tri-merge” credit report from a credit reporting company, so there is documentation of all the debt that is date stamped. This report includes data from all three bureaus, which is important because information can sometimes vary from bureau to bureau. If more debt shows up later, at least there is a baseline for when it was opened when you first began planning for the divorce.
  • Detail all the debt and assets in writing: Each spouse should have both debt and assets identified by account number and creditor name. For example, if you have a car loan, list the make, model and year, the name of the lender, the balance of the loan, the monthly payment and the account number. It’s best to also provide the most current statements with balances even if you have a credit report, since the balances on credit reports may not reflect payments or charges made in the last 60 days.
  • Provide your attorney with current asset and income documents: When you’re trying to determine who gets what, the final decisions will likely be made based on who makes what, and which assets will be split such as retirement, stocks, bonds, cash value life insurance, cars, motorcycles, etc. This information will also be needed as part of the mortgage application process, so it’s good to have it organized and ready to provide when it’s time to start the refinance.
  • Write down any details of actions to be taken after divorce: If one spouse is going to refinance the property into his or her name, it should be clearly stated with a deadline for when the refinance must be completed. If credit cards are going to be paid off as part of a refinance, the instructions should clarify all the details.

Child support and alimony in future mortgages

Even if you’ve been awarded child support and alimony, you may not be able to use it to qualify as income for a mortgage right away. Be sure to keep documentation of the receipt of any of these sources of income the first year you receive them.

  • Three months after a divorce. If alimony or child support is court ordered, they can be used as income to qualify for a new mortgage as long as proof of receipt of the income for three months is provided.
  • Six months after a divorce. If the child support or alimony is “voluntary,” meaning your ex-spouse has agreed to pay without a court order, proof of receipt of the income for six months can be used to qualify for a new mortgage.
  • Child support agreement with birth dates. In order to use child support to qualify, you’ll need proof that the income will continue for at least three years. The decree should show the children’s ages, but lenders could request birth certificates as well.

There are different ways that divorce liabilities like alimony and child support are counted against you, which may affect your ability to qualify for new mortgage financing. If the alimony you pay is court ordered, be sure to provide a copy of the divorce decree.

Voluntary versus court-ordered alimony and child support. If a spouse opts to pay child support or alimony without any court order enforcing payments, it doesn’t have to be counted against the ex-spouse on a mortgage loan. Court-ordered alimony must be counted, but rather than counting it against the borrower’s total debt, it can be treated as a reduction in income, which doesn’t have as much impact on debt-to-income ratios.

The bottom line

The most important thing to remember with homeownership and divorce is that your responsibility for paying the mortgage only changes if one of you can qualify for a new mortgage loan. Even though a divorce decree may require the mortgage to be paid by an ex-spouse, that doesn’t provide you any protection against the credit effects of a late payment or default.

The same is true of debt that is divided up. If your ex is late on debts the decree states he needs to pay, your credit will still be impacted. A little bit of pre-planning and organization can go a long way to making the divorce refinancing process less stressful, and prepare you for your financial life after divorce.

This aticle contains links to LendingTree, our parent company

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

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How to Rebuild Equity on an Underwater Mortgage

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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There are some things you can’t control as a homeowner, such as natural disasters, neighbors or the direction of home values. If these happen to take a nosedive, you could watch the equity you’ve built in your home disappear.

In fact, more than 5 million homeowners are “seriously underwater” on their mortgages — meaning the amount of debt attached to their home is at least 25% higher than the home’s value, according to the latest data from ATTOM Data Solutions, a property research firm. If you’re one of these homeowners, don’t despair. There are ways to rebuild the equity on an underwater mortgage. In this guide, we’ll explain what it means to have a mortgage underwater and how to rebuild the equity you’ve lost.

What is an underwater mortgage?

An underwater mortgage is a loan with an outstanding balance that exceeds the value of the home it secures. This is also referred to as having negative equity or being upside down on your mortgage.
There are a few ways that a mortgage can become underwater:

  • Significant drop in home values
  • Multiple loans taken out against a home, and the total balance is higher than the home’s value
  • Monthly payments not covering the interest due on a mortgage (negative amortization), and the balance owed grows instead of shrinks

If you tried to sell your home while it’s underwater, the sales proceeds likely wouldn’t be enough to pay off your mortgage, which would leave you on the hook for the remaining balance. You’d also have a hard time refinancing your mortgage, since you need to have some equity available for a refinance in many cases.

How to tell when my mortgage is underwater

If your current mortgage balance is higher than your home’s current market value, then your mortgage is underwater.

For example, let’s say your home was worth $250,000 when you first bought it, and you took out a $200,000 mortgage with a 4% interest rate. Five years later, the economy takes an unfortunate tumble and home values drop by an average 40%, giving your home an approximate $150,000 value.

Based on your loan’s amortization schedule, the outstanding balance you’d owe in year five would be about $180,000. That leaves you with $30,000 in negative equity.

Negative Equity in Your Home

Estimated Home Value in Year 5

$150,000

Estimated Mortgage Balance in Year 5

$180,000

Available Equity

-$30,000

If you find yourself in a situation similar to the one described above, there are options available to help you rebuild your home equity, which we’ll discuss in the next section.

How do I rebuild equity?

Just because your mortgage is underwater doesn’t mean it has to stay that way. There are ways to start rebuilding the equity you might need to fund other financial goals.

Pay down your mortgage as usual

The most straightforward option is to continue to pay down your mortgage as you normally would. Perhaps the housing market will recover, leading to an eventual rise in home prices. Either way, as long as you’re submitting your mortgage payments in full and on time, you’ll pay it off on schedule.

You can help speed things along by paying extra toward your principal balance. There are several ways to tackle this, which might include adding a couple hundred dollars — or whatever amount is comfortable for you — to your mortgage payment each month.

Another option is to make biweekly payments instead of monthly payments. This can add up to one extra payment each year. That’s because there are 52 weeks in a year and you’d make 26 half payments, which equals 13 full payments.

Be sure to ask your mortgage lender or servicer to direct any extra money you pay on your loan toward your principal balance (not interest).

Modify your mortgage

If you’re experiencing a temporary hardship on top of your underwater mortgage and are struggling to keep up with your mortgage payments, you could benefit from a mortgage modification.

A modification is when your lender changes the original terms of your mortgage to make it more affordable for you. Changes might include:

  • Extending the number of years you have left to repay your mortgage
  • Lowering your mortgage interest rate
  • Reducing your outstanding principal balance
  • Switching your mortgage rate type from adjustable to fixed

Eligibility requirements vary, so it’s best to contact your lender for more information about how to modify your loan.

Recast your mortgage

Another way your lender can make tweaks to your existing mortgage is by recasting your mortgage — especially if you’ve recently come into a financial windfall.

A mortgage recast involves paying a lump sum of money toward your outstanding principal balance. Your lender then recalculates your monthly mortgage payments based on the lower principal balance, but your mortgage rate and term length stay the same.

You’ll need to pay at least $5,000 — sometimes more — to recast your mortgage, and you might also be charged a recasting fee, up to $500. Check with your lender for more details and requirements.
Conventional loans typically qualify for mortgage recasting, but not government-backed loans, such as those insured by the Federal Housing Administration (FHA loans) or Department of Veterans Affairs (VA loans).

Refinance your mortgage

Although the Home Affordable Refinance Program (HARP) — a government-sponsored initiative that helped nearly 3.5 million homeowners refinance their mortgages — has expired, there are other programs available that provide similar assistance.

Fannie Mae and Freddie Mac, the two major agencies that buy and sell mortgages to and from lenders that follow their guidelines, created new initiatives as HARP was ending to address those homeowners who were underwater on their conventional mortgages or have high loan-to-value (LTV) ratios. An LTV ratio is calculated by dividing your loan amount by your home’s value. Revisiting the underwater mortgage example above of a home worth $150,000 with a $180,000 mortgage balance, the LTV ratio is 120%.

Fannie Mae’s high LTV refinance option offers homeowners with an LTV ratio above 97% the opportunity to refinance their mortgage. Homeowners must be current on their mortgage payments and benefit from at least one of these options:

  • A reduction in the principal and interest portion of their monthly payment
  • A lower interest rate
  • A shorter loan term
  • A more stable mortgage, such as a switch from an adjustable-rate to a fixed-rate loan

There is no maximum LTV ratio for fixed-rate mortgages, but adjustable-rate mortgages (ARMs) have a 105% LTV maximum. The existing mortgage must be Fannie Mae-owned.

The Enhanced Relief Refinance mortgage offered by Freddie Mac also requires homeowners to be current on their mortgage payments and have an LTV ratio that is higher than allowed for a standard refinance. The maximum LTV ratio allowed for ARMs is 105%; there’s no maximum for fixed-rate loans.

Homeowners must benefit from a shorter loan term, lower principal and interest payment, lower mortgage rate and/or a move from an ARM to a fixed-rate mortgage.

If you have a government-insured mortgage — FHA, USDA or VA loan — you may be able to take advantage of a streamlined refinance, which typically has a limited credit documentation and underwriting process. Additionally, you may not need an appraisal to verify your home’s value.

  • FHA: FHA borrowers applying for a streamlined refinance must be current on their mortgage payments and benefit from at least a 5% reduction in their monthly payment amount. You may also qualify if you’re switching from an ARM to a fixed-rate mortgage or shortening your loan term.
  • USDA: Borrowers with USDA loans may qualify for the streamlined assist refinance option if they have little to no equity and are current on their payments. The benefit must come from a monthly mortgage payment that’s at least $50 lower than the existing amount.
  • VA IRRRL: The VA Interest Rate Reduction Refinance Loan program helps homeowners with VA loans by lowering their mortgage payment through a reduced interest rate. Guidelines require a minimum 0.5% rate reduction.

Other options for underwater homeowners

If you’re ready to walk away from your home or simply can’t afford it anymore, consider one of the avenues below:

Home sale

You could attempt to sell your home, with the understanding that you likely won’t make enough profit to pay off your mortgage. If you have a hefty savings account, you can use some of those funds to pay the difference between the amount your home sale covers and your outstanding loan balance.

Short sale

Another option is a short sale, which allows you to sell your home for a price that is less than the outstanding balance on your mortgage. Additionally, your mortgage lender may forgive your remaining mortgage debt. Keep in mind that your credit score will take a hit with this option — it could drop by 100 points, according to FICO.

Deed in lieu of foreclosure

A deed in lieu of foreclosure, also known as a mortgage release, is the process of voluntarily transferring the ownership of your home to your lender. In exchange, you may be released from your mortgage payments and debt. This option also prevents you from going into foreclosure.

Similar to short sales, a deed in lieu of foreclosure negatively impacts credit scores.

The bottom line

You may feel helpless if you’re dealing with an underwater mortgage, but you have options. If you’re able to manage your monthly payments as they are, it may be best to continue paying down your loan as usual, making extra payments whenever possible. But if you’re struggling or simply want to reduce your payment amount, consider a loan modification or a refinance.

Be sure to discuss your available options with your mortgage lender or servicer, and remember that maintaining on-time payments will help your case.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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Life Events, Mortgage

The Risks and Rewards of Out-of-State Investment Properties

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Mortgage

They say real estate is all about “location, location, location.” That’s especially true when it comes to investing in rental properties. Where you choose to buy can have a significant impact on your return on investment.

For example, in a state like New York, where the median mortgage exceeds the median rent by nearly $250, buying a property to rent out doesn’t make much financial sense. If you consider buying rental property in a different state, such as North Carolina where rents in the city of Charlotte top mortgages by $84 per month, you’ll net a profit instead of a loss every month your tenant pays rent.

Before you start the interstate home search process, you should know the risks and rewards of out-of-state investment properties.

Potential rewards of buying an out-of-state investment property

Very often, the primary reason to buy an out-of-state rental property is investment properties where you live are too expensive. There are some other more strategic reasons that we’ll cover next.

Diversify your real estate assets

Real estate markets rise and fall. During the housing boom of 2003 to 2007, many of the “sand” states, such as California, Arizona, Florida and Nevada, experienced home price appreciation at rates well above historic levels.

Investors learned a painful lesson in the danger of not diversifying when the housing markets in those states crashed during the housing crisis. Investors who had investment real estate concentrated only in these states lost big, while those who spread their portfolios out to other states fared better.

Purchase future vacation or retirement residences

If prices and rents are competitive in a state you’ve always wanted to vacation in, you may want to purchase the property first as a rental and allow tenants to build some equity for you while you generate income. After a few years, you may decide you want to spend a few months a year vacationing in the home and rent it out seasonally with a rental plan from a service such as Airbnb or VRBO.

Alternatively, you may live in a cold-weather state, such as Massachusetts, and want to retire to the warm winters of Arizona. You could put the wheels in motion on your retirement plans by buying a rental property there first that has the amenities you would want in a home for retirement.

Once you’ve pocketed some rental income and equity from renters, you can pack up for the cross-country move into the rental, throw out the snow shovel and enjoy wearing shorts instead of parkas during the holiday season.

Buy where the laws suit your rental strategy

Short-term rentals have become very popular for real estate investors, but they face legal challenges in some places. For example, New York City subways are covered with signs warning riders to avoid short-term rentals.

If you are interested in renting out your property through a service like Airbnb, buying in a state that has more flexible laws about short-term tenants is your best bet.

Net more income monthly with lower property taxes

According to a recent LendingTree study, homeowners in San Jose, California, paid on average $9,626 in property taxes each year. In Salt Lake City, homeowners pay only $2,765 per year — which means you’d have to get an additional $567 per month in rent in California just to cover the property tax expense before you could make any profit.

Risks of buying an out-of-state investment property

Like any investment, there are risks associated with buying out-of-state rental properties. We’ll discuss those next.

Long-distance property management problems

If you have a rental in the city you live in, you can deal with an unexpected tenant move-out or a late-night plumbing problem by driving over to the property and taking care of the issue yourself. But you’ll need to make some decisions about how to manage an out-of-state rental.

If you hire a property management company, they’ll take 8% to 12% of your monthly rent as a fee, eating into your monthly rent profit. If you self-manage, you’ll need to make sure you build relationships with local handymen, roofers, plumbers and pest control professionals so you have their numbers handy if a tenant emergency comes up.

State laws that restrict how you rent your property

Short-term rentals, such as Airbnb, may be a great way to generate a higher monthly income than you would get with a 12-month lease, but some cities and neighborhoods aren’t too keen on having a lot of different people coming and going through a nearby house. If the laws prohibit short-term rentals in an area you’re interested in, you’ll have to crunch the numbers to see if market rents for long-term leases provide you with a good return on your rental investment.

What to look for when considering an out-of-state rental property

When you’re buying in another state, take extra precautions to make sure you understand everything about the local housing market, building standards and how the local economy is doing before you start making offers. The last thing you want to do is end up with an out-of-state money pit.

Get a thorough home inspection

No matter how nice the home may look in pictures or at an open house, there can always be problems beyond the smell of new paint and carpet. Building standards and practices may vary from state to state and city to city, and you don’t want to be caught by surprise because you didn’t know polybutylene pipes behind the walls of homes built in Tucson, Arizona, have been known to burst without warning.

A good local home inspector will also help you understand whether a property has been built and maintained according to local building standards and identify any issues, such as an unpermitted room addition, that could cause you trouble with local housing inspectors down the road.

Interview several property management companies

Depending on the town, you may find very high-tech, organized property management shops with decades of experience or small mom-and-pop shops that offer real estate property management services. Either way, you want to know what they do for their fee. The graphic below provides a list of questions you should ask to make sure the property manager is a good fit for your out-of-state rental.

  • How many rental units do you manage? Ideally, you want a manager who has between 200 and 600 rental units. This indicates that the management company has a solid enough client base to understand the local market but not so extensive that they won’t be able to handle managing yours.
  • What experience does your company owner have managing rentals? When the long-distance plumbing hits the fan you don’t want to be dealing with a company that’s never managed rentals. There is no college of rental property management, and you don’t want to have your rental managed by someone who’s still learning the ropes.
  • Are you actively investing in real estate in your market? If you are buying in a housing market you’ve never purchased in, you may want to have a property manager who understands the nuances of the local rental market. This is especially important intel when you’re dealing with an out-of-state investment property in a neighborhood that may be going through changes that only an experienced local investor would know about.
  • How do you collect rent? In order to track cash-flow of a rental property, you should be able to easily track payments. The best method is through an online payment system that gives you real-time information about any late payments. If you took out a mortgage to purchase the rental property, you want to know as early as possible if a tenant is going to miss rent, so you can move money to cover the mortgage payment.
  • What is your average vacancy time on rentals? The correct answer should be two to four weeks. An experienced property management company should have the marketing and rental pricing know-how to make sure your property is not vacant for more than a month. It’s bad enough having a rental vacant, but when it’s out-of-state, you want to know the company managing the property has a track record of getting renters quickly to minimize the expenses you incur when a rental is without a renter.On the other hand, a property manager that rents out your place in less than two weeks may be pricing it too low.
  • How do you handle maintenance and repairs? It’s not uncommon for a property manager to have “preferred” vendors to help with the inevitable issues that come up with maintaining and repairing a rental. You’ll want to get a list of these preferred providers and keep track of their expenses.Also be sure to put a cap on the cost of repairs that can be done without your authorization. You should trust the company to handle a $100 fee, but you may want to cap them on anything more than $200 so you can have a chance to see if you need a second opinion with a different vendor.

Track property tax trends in the neighborhood

Property taxes are a fixed expense you can’t get around paying, so be sure to track the last five years of property taxes to see what the average increase has been. If you’re seeing an acceleration in the tax rate, figure that into your return-on-investment analysis, so you don’t end up in a situation where your monthly expenses are more than the rent you’re taking in.

Make sure you understand the rental market in the area

Rental markets ebb and flow as new homes are built, new employers set up shop nearby or new schools are built in the area. A good property manager or experienced real estate agent should be able to give you a good idea of where the market is headed with a comparable rental analysis.

When you bought your first home, you may have gotten a comparable market analysis (CMA), which analyzes what homes are selling for in the area you’re thinking of buying. A comparable rental analysis looks at rentals nearby to give you an idea of what your monthly income is going to be.

If you finance the property with a mortgage, you’ll likely need a rental analysis form 1007, which is an additional report in a residential home appraisal that provides an opinion of the market rent for the home you’re buying. In some cases, the appraiser’s projected market rent can be used to help you qualify for the new mortgage, even if you don’t have a lease on the property you’re buying.

Special mortgage considerations for out-of-state rental property

If you’ve been buying investment property in your hometown, you already know financing a rental property comes with higher down payments and interest rates. There are a few more factors to consider.

Are transfer taxes due and who pays them?

Depending on what state you are buying property, transfer taxes may be charged for you to take ownership of the property you are buying. Unlike property taxes, these are a set lump sum percentage of your sales price, added to your closing costs.

Transfer taxes are often paid by the seller, but in some cases they may be payable when buying a home, adding to your total closing costs. It’s also good to at least know how much they are so they don’t end up being one of those hidden costs of selling a home. In places like New York City, that could mean an extra 1% to 2.625% of your sales price subtracted from your profit, in addition to real estate fees that usually run between 5% and 6%.

Are you buying in an attorney or escrow state?

Depending on where you purchase your rental property, you may need an attorney to handle your contract negotiations. That means higher costs than you’ll find in an escrow state, where an escrow offer can handle the signing usually at a much lower cost.

Are you buying in a community property state?

If you’re currently married or have a domestic partner, the community property laws could affect what happens to the property in the event of a divorce. Community property states require a split of equity down the middle, whereas the equity can be split up in negotiable amounts in a non-community-property state.

Final considerations

A little due diligence and research will help you avoid unpleasant surprises if you’re considering buying an out-of-state investment property. While many real estate companies offer “virtual tours” of homes, there’s nothing like an in-person tour to soak up the light, views, smells and feel of a home before you buy it.

If you can, budget enough time to take a trip to the state you’re considering buying in to inspect the top contenders before you start making offers on an out-of-state investment property.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

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