What Is an Absentee Homeowner in Real Estate?
An absentee homeowner is a person or entity that owns a property but does not live in it. Absentee homeowners may use their property as a short-term rental or something else entirely. If you’re an absentee homeowner, it’s not because of how you use the property. It’s because you don’t live in it or actively manage it.
If you’re considering investing in property you don’t plan on living in full time, there are a handful of things you should know about absentee homeownership. We’ll tell you the pros and cons and everything else you need to know about investing in a property as an absentee owner.
What Is an Absentee Owner?
An absentee owner is a person or entity that owns a property but does not live in it or actively manage it. Property can be owned by individual investors, a corporation or a real estate investment trust.
Examples of absentee homeowners include:
- An investor who owns a rental property in another city or state
- Property owners on military leave
- An inherited property or a rental property
- A corporation that owns an apartment complex managed by a third party
- Landlords with a gap in tenancy
Pros and Cons of Absentee Ownership
When the topic of absentee ownership comes up, it’s usually in the context of rental properties. However, that isn’t always the case.
Absentee owners don’t have to limit themselves to properties they are geographically near. They can purchase property anywhere in the world.
The owner can focus on managing their business and growing their portfolio rather than managing individual properties.
The acquisition of new properties can usually be scaled up faster.
Owning property as an absentee owner can offer tax benefits that would be unavailable to an owner-occupier.
The property is easier to sell because the owner does not live on the property.
Owning a rental property as an absentee owner can provide a steady stream of passive income.
⛔Dependence on others
Absentee owners must depend heavily on property managers. If your property is poorly managed, it can cause problems that extend beyond your bottom line.
⛔Additional insurance requirement
Depending on your intended use of the property, absentee homeowners may require a different type of homeowners insurance policy.
Poor maintenance by a property manager can lower the property’s value or cause it to be condemned.
⛔High barrier to entry
When the housing inventory is low – which is very much the current situation in many housing markets across the U.S. – it can be difficult and expensive to find properties that meet your investment criteria.
⛔Liability without oversight
If something goes wrong on the property, the owner (and their insurance company) may be liable for damages or losses.
⛔Lack of control
Absentee owners may not have as much control over their properties, especially if they rely on someone else to manage them.
Why Do Absentee Owners Matter to Real Estate Investors?
There are so many reasons people become absentee homeowners. The vast array of reasons explains why real estate agents seek out absentee sellers because they are often considered motivated sellers. It’s not unusual to find absentee owners who want to sell a property because it’s a source of financial and even emotional stress.
While absentee ownership can provide great opportunities and benefits, the benefits can become a liability in the long run.
Sometimes absenteeism is unavoidable. Maybe you’re in the military and are stationed overseas. In that case, you may need to rent your home while you’re away. Maybe you inherited a home. You may feel grateful, but if your finances are straining to deal with the inherited home’s bills and your own, your newly inherited property could feel more like a burden.
These reasons (and more) can present financial windfalls for motivated investors.
If you’re a real estate investor looking for a lead on a great deal, here are some tried-and-true methods to find absentee sellers in your area:
- Tax records: Most counties keep a public record of all their property owners. The information you get will vary by county, but you can get creative and filter your search for specific criteria, such as unpaid utilities or when the home was acquired.
- Rental listings: Scour rental listings to find motivated absentee sellers. Be on the lookout for rental homes that have been listed several times. These homeowners may be interested in selling if their property isn’t being rented out consistently.
- Vacant houses: An old-fashioned drive-by can also help your search for motivated sellers. If a house appears vacant and is in disrepair, the owner may be motivated to sell to rid themselves of the property.
- Absentee lists: Some companies sell lists of absentee homeowners. The lists are usually compiled from public records or rental listings.
Once you’ve gathered a list of potential sellers, it’s time to start reaching out. Real estate investors can contact absentee sellers by phone, email or direct mail, or they may hire telemarketers to make appointments.
Remote Work Extends to Real Estate
Absentee ownership in real estate is nothing new. People have owned real estate remotely for ages. What is new is how technology has made remote investing incredibly efficient. It’s easier than ever to purchase a property in another city, state or country.
If you’re a real estate investor or on the cusp of building your real estate empire, there is a world of possibilities at your fingertips.