Buffalo medical campus aims to generate small business growth and add to surrounding neighborhoods

Written by Alan Findlay on . Posted in Investor Insight

While its always good to see job creation and economic growth, the plans highlighted by William L. Joyce, chairman of the Medical Campus, and Matthew K. Enstice, its president and CEO, in the dig co-working space in the Thomas R. Beecher Jr. Innovation Center showed promise for local jobseekers in the surrounding city neighbourhoods.

buffalo niagara medical campus

Situated just north of Downtown Buffalo, the moves are likely to help accelerate the revitalization of Buffalo inner city, which in recent years has seen a reversal the previous ‘move to the suburbs’ trend, eliminating blight from many areas and making the city a more pleasant place to live.

The article quotes:

“Workforce-development efforts are focusing on the Fruit Belt, Allentown and downtown neighborhoods, with a particular emphasis on connecting people who live within a one-mile radius of the campus with jobs at the hospitals and research centers there.” – great news for local landlords and property owners.

Real Estate Tips – Getting Finance and Reducing Money Down for USA Investments

Written by Alan Findlay on . Posted in Investor Insight

One of the biggest issues for foreigners buying in the US is the difficulty in obtaining good lending on properties. Even a small amount of gearing can improve returns dramatically, and reduce the amount of money needed for the purchase. Sadly though, in USA right now, often the only options are buying cash, or taking ‘hard money’ lending which can have high interest rates (10-15% at time of writing) and short amortization times (3-5 years typically).

However, I’m happy to say that now we have a lender who offers excellent terms on our properties – Up to 75% loan to value with 10 year terms, 30 year amortization, and competitive interest rates (circa 6-8%). The lending is based on the asset, rather than the individual borrower.

Abbotsinch partners up to offer mortgages

The difference in ROI here is amazing – lets look at a typical example property from our list, 481 17th Street.

The worked example on the link has a net income of $710.40 per month, and a price of $48,000. Lets say there are $1,500 in closing costs, and the house has a ($710.40×12)/$49,500 = 17.22% net ROI per annum. Not bad, bearing in mind there’s the added bonus of capital growth too.

However, lets look at the same house with a 75% LTV mortgage. If we assume a higher rate of 8% interest, and 2% costs added into the loan too, then we’d have a loan of 0.75x$48,000 = $36,000 + $720 fees = $36,720.

You’d invest $49,500 – $36,000 = $13,500

Over 10 years, with a 30-year amortization schedule, you’ll be paying a monthly mortgage of $269.44.

After 10 years, you’ll have amortized the loan down to $32,212.51 – i.e. paid down the fees plus $4,787.49 in capital or $39.90 a month. At this point you could either roll over the finance or sell the house, or even just pay down the remaining mortgage.

So from your investment of $13,500 – you’ll have a monthly income of $710.40 per month, minus the mortgage payment of $269.44 per month, plus the amortization of average $39.90 per month = $480.86 per month income.

In other words $480.86 x 12 months / $13,500 = 42.74% net ROI.

So a typical house jumps from 17.22% ROI to 42.74% ROI with this financing.

However, while this seems amazing on paper, we all know as investors that one variable that we didn’t take into account with this calculation – The inevitable costs of repairs, maintenance, and general wear and tear, which eat into the income from time to time. Lets say for example, conservatively that 20% of net rent should be deducted for repairs, wear and tear, voids etc.

This gives the following, more realistic results:

Without Financing

$710.40 per month – $142.08 per month = $568.32 per month
$568.32 x 12 months / $49,500 = 13.77% net ROI, which in my experience is more typical for a double unit like this.

With Financing

$568.32 – 269.44 mortgage payments + $39.90 amortization = $338.78 per month
$338.78 x 12 months / $13,500 investment = 30.1% net ROI.

That’s 30.1% return per annum over 10 years, plus the inevitable bonus of capital growth, (the prospects which are good in Buffalo/Niagara Falls, according to Zillow – look under neighborhood/market guide)

Are you an overseas or domestic investor looking to increase the cash flow of your portfolio? Pick any property from our list and go through the 75% LTV example to compare the two scenarios. Questions and inquires are welcome at info@abbotsinchcapital.com

How Affordable is Buffalo in 2015?

Written by Alan Findlay on . Posted in Investor Insight

Why is Buffalo attractive to investors?

One of the key reasons for us buying in Buffalo is its affordability. While the city has moved from no.1 in USA to no.3, in this variable, according to Forbes, this isn’t necessarily a bad thing. It means that demand for housing is rising higher than supply, which is always good for landlords. It means that investors have taken notice of the city and put their own money in there, that the economy and population are growing, and it could also perhaps mean that locals are buying more houses for owned occupation.

The city has a long way to go before it ceases becoming one of the most affordable cities in USA, but as an existing long term landlord, it’s a good feeling to see it begin that journey.

An economic overview of Buffalo

In the 2013 “On Numbers” index measuring the long-term economic health of all 102 metro areas, Buffalo ranked 27th. This was obtained as an average between its 55th place for the short-term undistinguished outlook before the “Buffalo Billion” program and its 8th place in terms of long-term economic potency. The short term having already passed, our investors might wonder how the city fares in 2015 and in the near future.

The housing market in Buffalo has always been an interesting feature. During the recent financial crisis, it avoided a crash and house prices even managed to experience steady growth. This is a clear indication that the housing market is not overvalued and that the city’s economy is not experiencing a financial bubble.

No housing bubble in Buffalo

The current major industries of the city are financial services, technology and education, with examples of recent developments being the Buffalo Niagara Medical Campus, the Inner Harbor and the Central Business District. By greatly developing the required infrastructure for just a few fast-growing industries, Buffalo seems to define its own competitive advantage and become increasingly independent of taxpayer handouts.

Public Spending

The “Buffalo Billion” program, which aims to bring roughly $1 billion in public funding to the city, so far has extended beyond being a government spending program – it provided the leverage needed by the private sector to harness the area’s natural advantages: its proximity to Canada, the water supply needed by the industry and the clean and affordable energy provided by the hydropower plants.

No housing bubble in Buffalo

This attracted energy and technology leaders, such as SolarCity, IBM and AMRI to kickstart local construction projects with a total price tag of $16.6 billion. All these efforts are also aimed at reducing the below-average socioeconomic indicators such as unemployment, poverty rates and low population growth. In this still-early stage of economic recovery, the city has seen an 8,500 increase in the number of jobs.

Changes in population

However, a sensible analysis of Buffalo’s economy should also look beyond the number of erected cranes in the city. What good are all the new buildings in an area if they are not well suited to the needs of the inhabitants?

No housing bubble in Buffalo

Despite population only beginning to grow again recently, after stagnation over the last five decades, local amenities such as the microbreweries, bike sharing schemes, sporting activities and the exotic food & drink scene have been the main attractions of recent graduates. The educated population has thus increased by 34% over a 12 year period. And with the cost of living being 11% below national average, it is not hard to imagine that the “Buffalo Billion” developments will have a big enough talent pool to fuel their growth.

Stunning Video Showing Buffalo’s Progress

Written by Alan Findlay on . Posted in Investor Insight

This video showcases the various projects that have elevated the economic outlook in Buffalo. Titled “This is the New Buffalo”, it shows the essence behind the city’s leading income growth per capita.

Why are Toronto House Prices 10 times that of Nearby Buffalo?

Written by Alan Findlay on . Posted in Investor Insight

I stumbled across this article in the Buffalo News earlier this year.

Fort Erie, Ontario is a fifteen-minute walk to Buffalo, New York, separated only by a border crossing and the Niagara River. Taxes have always been higher on the Canadian side, unemployment 7% against Buffalo at just over 5%, and its economy, according to its own development corporation continues to stall while Buffalo grows.

So why are house prices more than double those of adjacent Buffalo? The article looks at the discrepancy (along with similarly glaring difference in other border cities) but is only able to stab at reasons. Median Salaries are higher. But so are taxes and living costs, so very little real difference. No one’s being lured across the river to any high paying jobs from Buffalo any time soon.

But look at the bigger picture. House prices in nearby Niagara Falls, Ontario are 20% higher again (3 times higher than Niagara Falls, NY) and Toronto, 1.5 hours away by car, prices are over 10 times higher than Buffalo.

Why are Toronto House Prices 10 times that of Nearby Buffalo?

Is it just me, or does that fact that a city that currently is 1.5 hours drive away, with house prices 1/10th of the price, merit some economic investigation from Toronto?

The glaringly obvious thing to develop the Canadian border cities as well as cross border economic activity would be a fast train link to the border at Fort Erie. Not only would this open up the (relatively inexpensive) area to hard pressed Toronto commuters, it would have the knock on effect of pulling people and investment into the region, with the added bonus of allowing lower taxed Buffalo/Niagara Falls to suddenly be within commuting distance to a city 10 times more expensive. It would also allow easy access to Niagara Falls, NY and Buffalo Airports, which can easily compete with Toronto Pearson, the most highly taxed airport in the world.

Torontonians already visit Buffalo. Canadian Newspapers have been really positive on Buffalo this year last. They no longer just buy goods in the mall. Local banks lend to Canadians on real estate and a fast transit solution would be just one more piece in the jigsaw towards helping making Buffalo, NY an attractive commuter city for Toronto, Ontario. The long term dynamics in an ever shrinking world means that its only a matter of time before the discrepancies between houses prices in Fort Erie and Buffalo shrink, and people in Toronto realise they can live in a beautiful old house in historic Buffalo, for the same $300k price as a grotty 1-bed apartment in Toronto.

Sadly there’s a big difference in what’s good for a city and what politicians want, but I thought I’d throw the idea out there in case the local transport minister is reading.

Alan Answers a Few Money Related Questions from H. Kuroiwa from Tokyo

Written by Alan Findlay on . Posted in Investor Insight

Q – I’m unlikely to have time to visit Buffalo in the next couple of years, so I wont be able to open a bank account (I understand that’s one of the few things I need to be there for physically, even if I have an LLC) What happens to my income?

A – You have a few choices here. The most common scenario is where the investor will simply get the property manager to build up the income in your account and wire it over as and when you wish. Some investors even just build this up until there is enough to buy a new house and keep it ‘rolling over’ in the US. Your income should be visible at all times and easy to keep an eye on. A good choice in property manager is also of utmost importance here – I’ve seen bad/dishonest managers check larger amounts on an account and miraculously having a ‘repair’ needed that adds up to about the same amount that is on account.

Q – Assuming that I have opened a bank account, can I use the ATM card overseas?

A – The simple answer is yes, although the bank may charge you, depending on who you bank with and what ATM you use.

Q – Will be I charged withholding tax on my profits because I’m an overseas resident?

A – Unless you apply for an ‘ITIN’ number, yes you most likely will be. Fortunately an ITIN number (which is a tax id number for overseas residents) is quite easy to apply for,  (via a W7 form) but check updates and latest best practice with your accountant.

2015 in Buffalo

Written by Alan Findlay on . Posted in Investor Insight

It’s felt like a quick 2014 here in Buffalo, but all in all it’s been the best year since I moved here. Momentum is gathering and in certain areas, house prices are rising fast (Overall, Buffalo prices rose 16 percent since May 31, 2006 – highest among the nation’s 100 largest metro areas, according to research by Clear Capital) The biggest risers have all been the more upmarket city districts, like Allentown, Elmwood Village, and North Buffalo, but as expected this action has caused positive house price ripples all the way through the ‘West Side’ and Blackrock –two ‘investment’ level areas that are witnessing widespread gentrification as we speak. I rarely see empty homes any more (I’m always looking to snap them up!) and the blight that had affected many investment level areas in the past is steadily lifting.

As always, lets look at the underlying trends – what’s actually happening in Buffalo, and what does it mean for landlords and potential landlords in Buffalo?

BRAIN GAIN

Looking at the macros, while the population in the metro shrank by almost 1% since 2006, the number of people age 20-34, known as ‘millenials’ jumped by over 10%, one of the largest rise in the country. Thats great news for Buffalo and a great many positive reasons are given herehere and here.

MEDICAL CAMPUS, DOWNTOWN, HARBOR CENTRE & TAX FREE SITES

What are young, economically active people moving to Buffalo for? Or not leaving? This year a whole raft of new critical masses seem to have been achieved. The Medical Campus, and Downtown have been focus points of new construction and job creation. The medical campus continues to grow , while downtown and Harbourside has seen a number of new hotels opening this year together with hundreds of new apartments, re-invigorating the area as a 24 hour mixed use neighbourhood.

RIVERBEND

Elon Musks new state of the art Riverbend Solar Panel Factory  is creating a lot more jobs than first expected. The plan for a medium size facility has been expanded and work has now begun on the largest solar panel factory in the western hemisphere.
STARTUPS and tax breaks

In the 2013 state budget, lawmakers approved a plan by Cuomo to get around the problem of New York taxes. StartUp NY would designate areas near state universities and colleges as tax-free zones, where companies could avoid all state taxes – including employee income taxes – for up to 10 years.

This year the program took off, with businesses clamouring to get in.

Thus far, zones exist at University at Buffalo, SUNY Buffalo State, SUNY Fredonia, Jamestown Community College, Canisius College and D’Youville College. More than a dozen companies have announced plans to move into the sites.

 

Overall, 2014 has gone a long way to diversify the city economy and put Buffalo on a strong footing for broad, steady economic growth in coming years. The confidence for once is real, the long term economic benefits are real and long term. The cities finances are (unlike many US cities) in good order. The difference between Buffalo and other cities in similar situations, of course is that here we can still buy a 2000ft2 4 bedroom home for $30,000.

Happy New Year Everyone.

Buffalo Diversifies

Written by Alan Findlay on . Posted in Investor Insight

While it’s no longer news that Buffalo has long turned the corner economically, the construction of the iconic SolarCity RiverBend site comes at the perfect time to bolster confidence and deny the dwindling band of naysayers on the city.

Buffalo News – A Historic Day for Buffalo

The psychological benefit for the city is one thing, but more importantly, its likely to further diversify the growing regional economy, making it less exposed to future downturns, thus reducing the risk of being a landlord in the area. Being exposed to one or two major industries in a city is never good for a landlord, while a steadily growing, low risk, diversified economy can comfortably fund your retirement.

CONTACT

Abbotsinch Capital LLC
Tel: +44 0141 356 2813
Email: info@abbotsinchcapital.com