You’re smartly thinking about investing in real estate beyond your home state. Great news! You can indeed secure a mortgage in one state to purchase a property in another. With the rise of remote work, we’re seeing some exciting demographic shifts across the U.S. Many folks are now considering a move to a more affordable state, thanks to the acceptance of working from home. Meanwhile, others are drawn to states like California, which have high vaccination rates and low COVID-19 rates. It’s a fascinating dynamic!
Given that we have enough passive retirement income to maintain our lifestyle, there’s no real need to stay in pricey San Francisco. So, I’m considering getting a mortgage in California to buy property in Hawaii.
After receiving my preapproval letter of credit, I asked my lender: "Can I get preapproved for a mortgage in California to buy property in Hawaii?" The lender replied that my preapproval was for a primary home in California, but it could be used to purchase a second home in Hawaii. However, the lender would need to send my application back into underwriting.
The lender had assumed I’d be buying a vacation home in Hawaii, so I had to clarify that we’d be buying a primary home there. Buying a vacation property usually requires a higher down payment and comes with a higher mortgage interest rate. So, if you can manage to get a primary residence mortgage instead of a rental or vacation property mortgage, your terms will be more favorable.
Now, you might be wondering if you can use your preapproved mortgage amount to buy a pricier property than initially estimated in another state. For instance, I was preapproved for $1,700,000 with an estimated purchase price of $2,800,000. I mistakenly focused on a specific property to buy, when I should have tried to get preapproved for the maximum mortgage possible to give me more options.
Now, I’m eyeing a more expensive property in Honolulu with lots of land near the beach, but I’ve somewhat limited myself based on the size of my down payment. I asked my mortgage officer if I could use my existing preapproved mortgage amount to buy a more expensive property. The officer said they would need to run the numbers again for a higher purchase price, but the only real figures that might change are the property taxes and HOA, if applicable.
Despite borrowing the same amount of money, your loan amount will need to get reevaluated mainly because it costs more to maintain a more expensive property due to property taxes, HOA expenses, maintenance expenses, and insurance expenses.
Most people are tied to their jobs and can’t just relocate to another city or state. But as remote work becomes more common, it’s logical for more people to consider moving to a cheaper part of the country, or to an area that offers a higher quality of life.
Relocating to Honolulu will stretch our dollars by ~30%. Therefore, our $250,000 in estimated passive retirement income would grow to roughly $325,000 in buying power. You can get a mortgage for a low rate and live in a different state to save.
The ability to buy out of state will affect prices. My original thought was to try and buy another San Francisco property at a discount. But once I started seeing some big discounts in the Honolulu luxury market, I’m having second thoughts.
Pay attention to the migration trends of your city. If enough people decide to leave, your city’s real estate prices may be negatively affected. If you’re an investor, it’s up to you to identify the best states and cities to buy property for capital appreciation and rental income appreciation.
If you’re looking to refinance a mortgage or get a new mortgage, check online. It’s good to check a leading lending marketplace where lenders compete for your business. Get multiple quotes in minutes. Then you can make lenders compete for your business.
If you’re looking to invest in real estate, check out Fundrise and CrowdStreet. They are my favorite real estate marketplaces to invest in real estate and earn more passive income. Personally, I’m diversifying my real estate holdings because I don’t want to manage more rental properties.
Fundrise offers diversified eREIT funds, which is most appropriate for most investors. CrowdStreet offers individual commercial real estate deals in 18-hour cities. You just have to do extra due diligence on each sponsor and build your own diversified portfolio with CrowdStreet.
They enable you to invest in real estate across the country where valuations are lower and cap rates are higher. The work from home trend is here to stay. Both platforms are free to sign up and explore.
Personally, I’ve invested $954,000 in real estate crowdfunding in multiple properties and funds since 2016 to take advantage of lower valuations in the heartland of America. Further, I’m earning income 100% passively, which is awesome as a dad to two young children.
Roughly $100,000 of my $310,000 in estimated passive income comes from real estate crowdfunding. My plan is to continue diversifying across America to take advantage of the weakening housing market.
Can you get a mortgage in one state to buy property in another state? Absolutely! I’ve been helping people reach financial independence since 2009. You can join 65,000+ others and sign up for my free weekly newsletter here.
