Western New York

[speedfreeksteve]

BTW.. I think we could use an "investment property" section maybe.

So I've been scanning through Trulia checking out properties in Buffalo and Rochester. After some time doing some research, it appears that area is REALLY flush with potential income properties.

You do have to weed out the crap, but there are some deals out there. Where in Ontario can you get a big house split into 2-3 apartments for under $70000? Sure the rents are cheaper, but you can still average around $1200/month rent on a multi-unit home. So even if you pay a local property manager to pick up the rents for you and check on things you're still clearing over $1000/month on it (minus one months rent to cover property taxes). Hell, buy three of those and you can almost live a modest retirement on that!

Anyone else on here have some insight to add on this?

[twinn1]

In regards to Western New York, you really have to have a good and honest real estate agent to help you out.  There are a lot of "okay" pockets surrounded by bad areas's, ie. think of Rexdale in Toronto, 90% is garbage but there are a few areas that have nothing but SFH's.   There is one area specifially, there is a teachers college in buffalo located in a sketchy type of neighbourhood, cheap houses but good rental potential.
The biggest concern for me personally would be the USA federal HUD program.  In many cases, the homeowner has no choice but to rent to lower income persons or face legal action from HUD. 

The issue that bothers me the most is the quality of tenants, in the US with their 30 year fixed interest rate and lax borrowing standards, I cannot imagine how anyone, even in todays tight credit enviroment,  even the guy working part time at Walmart would not qualify or be able to carry a mortgage of 70K.  Now, what kind of people would be renting from you? new immigrants, transients, ex con's etc..  I would except a high turnaround in buffalo.

From talking to friends that live in the US, it is not uncommon for families to relocate were there are job opportunites, I have friends that have lived in 5 dfferent states in a span of 10 years.  Much more so then in Canada, were the odd person might have gone to Alberta in the past.  Buffalo is a city on the way down, has been for the last 10 years or so when a lot of plants closed down, there has been almost no price appreciation in the last 10 years there compared to other parts of the US.  There is a reason for that.

[speedfreeksteve]

The HUD program is actually how some investors are making all of their money right now. It is largely in the landlords favour. Why would your biggest concern be to have the government paying their rent to you directly?

I'm not sure what you think is wrong with immigrants, but Buffalo doesn't have any worse of a demographic than Toronto as far lower income areas. The level of home ownership in Buffalo is low compared to the GTA, and the turnaround may actually be less since very few are giving up renting to buy. I have rented to immigrants in the past and never had any problems at all with getting the rent on time.

I know that it does seem shocking that people two hours from Toronto can't afford to buy a 70k house but you have to compare the average incomes in Buffalo to see why.

Average household income (approximate)

Toronto                $51,000
Mississauga          $94,000
Buffalo                 $23,000

Buffalo rentals also average just under 4 years and the average household spends 29% of their income on rent (not including utilities).

So take an average household.. income $23000, minus taxes @ 15% ($3450), minus rent (29% of $23000) $6670, utilities (average gas bill = $179 per month and the average electric bill = $1584 per year).

So the "average" household is left with  $10144 before they've even started to think about food, transportation, entertainment, xmas gifts, etc.

I personally don't see much of a way to save even for a 10% down payment in that scenario, even if they would give you a mortgage with 10% down in the US anymore.

Buffalo didn't all the sudden go down in the past 10 years. It's decline started in 1950 with the decline of steel and heavy industry. Some parts are experiencing a revitalization. The past 10 years the unemployment has hovered around 5%, which is about 1% better than the level on our side of the border in the Niagara region.

I agree about the price appreciation, I wouldn't expect much there, but I'm focused on steady income for this sort of investment.

[twinn1]

I have nothing against immigrants, the point I was trying to make was that your going to be renting to a "transient" type of individual, chances are that its going to be a high turnaround enviroment and it will only be occupied 80% of the time.  Lets be honest, someone might live in a iffy neighbourhood because thats all they can afford at the moment, but they won;t live there for long.

  The problem with HUD program is that, in many cases, those homes are left in very bad condition once the renter moves out, good luck getting the government to reimburse you.  Other problem is, if I have a choice I would rather rent out my properties to someone who is gainfullly employed and not living of the government.  We have something similar in Ontario, not sure what its called but social services guarenttes payment and the rent is deducated from the governemnt cheque.

The problem in buffalo is high crime, the areas that you are talking about are all iffy or else the price would not be 70k, in some areas just outside buffalo like cheetkowaga? (spelling?) home prices start in the 150's and go to 250's for something really nice.   Its just like Hamilton, homes beside the steel mills can be had today for 70K but once you go over the hill into the limeridge area or the area beside Mcmaster prices are 200K plus even though its only a few minutes that seperate them.

I had no idea that the average income was so low in buffalo and that is household income, suprising since unemployment is 5%, its mostly service sector jobs, no real industry to speak off. 

[Dave2]

Speed: 

I have owned and rented multitenant properties for over a decade.  I had a gem in Toronto, on a major street, within 1/2 a block of a subway station and a block of a go station on the last undeveloped corner.  I sold it last year (for a good profit) because I moved over an hour away. 

My rule is with multitenants unless you have a big enough property for an onsite manager (probably greater then a twelve plex) you have to be located within 1/2 hour driving time.  I moved an hour from Toronto so I sold it.  (at a good time). 

Personally I think many of the people in the US who have bought small investment properties out of state without onsite management are nuts.  Tenanted property other then triple net properties such as industrial or commercial properties require work and baby sitting.

Dave 2 or according to Frank (also) (is he being nice to me because I am sure when I compete against him I will probably be an also ran. )

[ErnestBidder]

  A few years back, I, too, thought like speedfreeksteve: WOW, look at these prices!!! I looked into it (but no deeply enough); wound up buying a 4 unit for something around 18k, 2 streets from D'Eauville College, about 2 minutes from the border bridge. Income was 1200/mnth, expenses were low, and I thought I was away. It was a 90 minute drive, and I made that drive almost weekly. My onsite manager padded expenses (Ooops! something else broke), billed repair labour to his 8 year old son, refused to pay rent or move out, and to turn over the keys when evicted; he even tried to bully a short Latino cop, but I got lucky in that the cop's folks were landlords and he wasn't going to take any sh*t off a deabeat tenant/prop mge, so he grabbed him by the shirtfront and shook him up & down for the keys. It still cost me $145 for the locksmith, because the keys he surrendered were odd ones he had kicking around. People moved in, brought in friends, collected rent off them, were never around to pay rent to me, and left. My RE agent, a gem of a lady, contacted a church working with Cuban immigrants; they told her that they would guarantee the rent for 90 days; they paid me direct for 30 days, then gave the rent money directly to the tenants. Guess what? When I said pay me directly and you owe me back rent, they denied ever promising to cover me for 90 days. The Cuban couple, working for the church in its immigrant programme, were themselves so disgusted, they quit. I got in some good people, but one of them, college student 20 yrs old, took up with 34 yr old pregnant no-good, who convinced him to stop taking meds, he got combative with 2 guys in a car, got multiple stab wounds for his efforts, and died in the back foyer. Front tenant, long time good guy right from the first, had decided weeks before that he was really a female, quit his job to draw welfare, lolled around in baby janes or somesuch (I found out when he answered the door in a sheer nightdress to reveal that HE NOW HAD BREASTS!), had some intimate friends over who broke into the deceased's apartment & cleaned it out, including my appliances. The unemployment rate may look low, because they've been kicked off benefits, or the bureaurocracy has somehow else managed to fiddle the figures, but I think the true unemployment rate would be 15 -25%. If you buy, there is no financing for a non-citizen, so bring cash.

  I wish you luck, and email for my Buffalo agent's info, she is truly a gem.

[twinn1]

came across this article today WKBW- local Buffalo TV station- though it would be relevant to this post.   

http://www.wkbw.com/news/local/51156677.html 

6 Vacant houses up in flames in one night, some interesting quotes from the article

 

Buffalo is a big fire town, even compared to larger cities like Los Angeles and Boston, we have more fires here in the Queen City than they do

On Buffalo's east and west sides, its estimated that 10,000 structures sit vacant and abandoned. And it causes a big crime problem

10000 vacant structures, I don;t know if this is a typo or what but that # seems kind of high

And of course the City of Buffalo is the third poorest large city in America

[GovGuy39]

as an investor i always believe and know that money can be made anywhere, anytime, all that is required is - an eye of an investor, there is usually said that there are 4 types of people in the world, employes, small business owners, business owners and investors.

which one do you like to be, both have their pros and cons.

investors get to keep the lowest share of the pie ( after giving to the other three, yet they  are the richest of the four, just some thought to think about).