# Income Property in Buffalo?



## iherald (Apr 18, 2009)

Has anyone had experience with buying income properties in Buffalo (or other cross-border locals?) I've seen some properties like this:

http://www.trulia.com/property/1045471795-1951-Niagara-St-Buffalo-NY-14207

Selling for $30,000 and bringing in gross rents of $18,600 per year (actually, it looks like it's $750 for both apts, so really the gross rent is $9,000) Obviously you'd need a property manager, and there is more risk, but with the dollar what it is, and the property values so low there, it is tempting.

Thoughts?


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## sags (May 15, 2010)

Downtown Buffalo is one of those places that you don't like to stop at red lights. I can't imagine what kind of tenants you would get, or how you would get them out if they didn't pay (which is a likely scenario)

Would a property management company even work there?

Nobody is buying these inner city dumps for a reason.


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## Addy (Mar 12, 2010)

iherald I'm also interested in knowing more about this. I've been looking at cheap properties in the States for some time now and still don't have it figured out, but I am very interested.


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## iherald (Apr 18, 2009)

sags said:


> Downtown Buffalo is one of those places that you don't like to stop at red lights. I can't imagine what kind of tenants you would get, or how you would get them out if they didn't pay (which is a likely scenario)
> 
> Would a property management company even work there?
> 
> Nobody is buying these inner city dumps for a reason.


There are a bunch of property management firms in Buffalo. But you're right, the reason that you're getting great returns is the risk. Plus, the fact that the real estate market has bottomed out. 

The theory of it makes sense to me, buy low, get low rents but a good return. Putting down 20% on a $30,000 house is pretty easy!


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## marina628 (Dec 14, 2010)

iherald I am always tempted with homes like this as I love the ROI potential.But if it is too good to be true it usually is.I invest in real estate and location is the key to having a good experience.There are many good homes in good areas in USA ,Florida is the market we are looking in.You can get a nice house/condo for $50,000 there with good ROI.Be careful when looking to buy in high crime areas.


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## leoc2 (Dec 28, 2010)

marina628 said:


> ...There are many good homes in good areas in USA ,Florida is the market we are looking in.You can get a nice house/condo for $50,000 there with good ROI...


marina,
I would be very interested in your research. What would be the yearly carrying costs for a $50,000 condo? In what geographic area are you looking at? Would a group purchase in a development stabilize the management association (condo board )?


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## kcowan (Jul 1, 2010)

Also don't ignore the tax implications of a Canadian owning an income property in the US.


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## iherald (Apr 18, 2009)

kcowan said:


> Also don't ignore the tax implications of a Canadian owning an income property in the US.


What are the tax implications? I always get to check "NO" on my tax forms for buying foreign property, but I don't know what happens when I check yes?


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## GoldStone (Mar 6, 2011)

iherald said:


> What are the tax implications?


a. You have to file US tax return.

http://www.irs.gov/businesses/small/international/article/0,,id=129631,00.html

b. You have to pay property taxes. I know that Florida has a two-tier property tax system. Non-residents pay the property tax at a much higher rate than locals. Not sure if any other states do the same.



iherald said:


> I always get to check "NO" on my tax forms for buying foreign property, but I don't know what happens when I check yes?


"YES" tells CRA computer to run some extra checks when you file your annual return. If you don't declare the rental income, the computer will flag your return for an audit. If/when you sell the property, you will have to check "NO" again. The computer will expect to see a capital gain (loss) on your return.


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## kcowan (Jul 1, 2010)

iherald said:


> What are the tax implications? I always get to check "NO" on my tax forms for buying foreign property, but I don't know what happens when I check yes?


You should review the 3 videos at Foreign property ownership
and click on the three-part videos at the bottom of the page by David Ingram.

There can also be estate tax implications but most of those are in flux and probably not a concern for most people here.

(BTW David Ingram recently passed away and they did a memorial show highlighting some of his best contributions over the years. It is near the top of the same page.)


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## AndrewSchultz (Mar 15, 2011)

Good morning all,

I apologize in advance for jumping in and making this my first post, but I feel like my knowledge could be of use. I'm a real estate agent and property manager in the Buffalo area.

There are a lot of great property deals in the Buffalo area, but you really need to be educated on where and what you are purchasing. iherald makes a great point when he says there is an awesome ROI, but there is also a risk. You can build a high risk portfolio on the east side of the city, for instance, and see a much larger ROI. You can also buy in University Heights with a lower ROI, but a student rental base which pays premium rents. My favorite areas are South Buffalo, Elmwood, and University Heights, because the risk to return ratio is best in those areas, at least in my eyes. 

The bottom line is, know what you are buying, and be careful where you buy.

Best,
Andrew


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## iherald (Apr 18, 2009)

AndrewSchultz said:


> Good morning all,
> 
> I apologize in advance for jumping in and making this my first post, but I feel like my knowledge could be of use. I'm a real estate agent and property manager in the Buffalo area.
> 
> ...


Andrew, thanks for the post. I also appreciate that you posted information and didn't use it as an advertisement for your services! 

Assuming one is interested in investing in a US city (any city will do), how do you recommend the investor learn about the good areas (lower ROI) versus bad, or good property management versus bad? etc.

Clearly that's part of the risk you take when you buy in a city outside your own (whether in the US or not).


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## AndrewSchultz (Mar 15, 2011)

iherald said:


> Assuming one is interested in investing in a US city (any city will do), how do you recommend the investor learn about the good areas (lower ROI) versus bad, or good property management versus bad? etc.
> 
> Clearly that's part of the risk you take when you buy in a city outside your own (whether in the US or not).


Your greatest ally when investing in a foreign country will be research. Real estate agents will often times not have all the information, or not be able to provide you with all the information you need, to make an informed decision. For instance, I can't tell you about crime stats in an area, I can only point you toward resources you can use to find the information. I can't provide you with a lot of detailed information on schools, but I can point you in the right direction. 

Also keep in mind that a lot of agents claim to know more about an area, and more about investment property, than they really do. Look for an agent that works specifically with investment clients on a regular basis. They will know where you want to be, and where you don't, based on your investment goals. However, we have to walk a fine line so that what we do isn't considered "steering".

My biggest piece of advice on buying property, is DON'T BUY WHAT YOU HAVEN'T SEEN! I had a client from California who had never seen 2 duplexes that I was managing for him, and didn't understand the neighborhoods he bought in were garbage. He lost HUGE, to the tune of probably $100k USD.

Regarding property management: In the state of New York, to LEGALLY manage a rental property for another person, for a fee, you either need to be a DIRECT EMPLOYEE of the property owner, or a real estate broker with a management contract. There are a LOT of unlicensed property managers in Buffalo, and I've heard a LOT of horror stories. Just something to keep in mind.

Let me know if you have any questions. I love educating new investors so they don't make huge mistakes.


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## iherald (Apr 18, 2009)

How do mortgages work for foreigners buying income property in the US? In Canada we now need to put down 20% to buy an income property. 

What happens in the US? Do people get US mortgages? Are the requirements difficult?


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## marina628 (Dec 14, 2010)

My friend lives in UK and bought a beautiful apartment in Egypt 3-4 years ago. Just in the past few months when all the protests was going on he discovered he bought in a very dangerous part of town .He uses it for maybe 1 month a year ,he bought purely for the fact it has a beautiful view .You really need to go and visit and research what the location is like before purchasing.TD will give Canadians mortgages on US properties but the go through their US branches.This is something new that came out in early 2010.


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## AndrewSchultz (Mar 15, 2011)

marina628 said:


> TD will give Canadians mortgages on US properties but the go through their US branches.This is something new that came out in early 2010.


Good to know! I just spoke with a friend of mine that does mortgages for Wells Fargo, and they don't offer any sort of mortgage product for out of country parties.

One thing you'll want to consider is that it's nearly impossible to get a mortgage on a property under $45,000 to $50,000USD, due to changes in regulations that are currently in effect over here.


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## iherald (Apr 18, 2009)

AndrewSchultz said:


> Good to know! I just spoke with a friend of mine that does mortgages for Wells Fargo, and they don't offer any sort of mortgage product for out of country parties.
> 
> One thing you'll want to consider is that it's nearly impossible to get a mortgage on a property under $45,000 to $50,000USD, due to changes in regulations that are currently in effect over here.


Hmm, that's interesting. As Canadians we don't get to write off mortgage interest like you do in the US, unless it's a mortgage just for an investment property. I guess you could use a line of credit.


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## AndrewSchultz (Mar 15, 2011)

iherald said:


> Hmm, that's interesting. As Canadians we don't get to write off mortgage interest like you do in the US, unless it's a mortgage just for an investment property. I guess you could use a line of credit.


Disclaimer: I am not an accountant. I'm a real estate agent. Talk to an accountant before making financial decisions.

That being said, I know what some of my clients have done in the past is purchase a property outright, then take out a home equity line of credit against the property for part of the properties value. That way if they need a sum for a major expense, they have the HELOC to fall back on. We always recommend clients plan for 8% of their gross annual rents in maintenance. Routine maintenance shouldn't hit 8% in most years, and this gives them a savings fund in the event that a roof needs to be replaced.


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## kcowan (Jul 1, 2010)

I you want to own revenue property in the US, you should also review this guide produced by the CRA: Canadian Residents Going Down South where you will see the requirement to remit 30% of gross rents to the IRS by the tenant/property manager.


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## iherald (Apr 18, 2009)

There is an interesting post on the Milliondollarjourney today with respect to the tax issues of buying US rental properties:

"For one, U.S based rental income would require the investor to file a U.S tax return every year which is a drawback in my eyes. The rental income is subject to a 30% withholding tax which is not included in the U.S/Canada tax treaty like when receiving U.S dividends (how investment withholding tax works). To get around this, KPMG recommends to file the U.S return with the election to pay tax on net rental income. The Canadian, in this case, will receive a tax refund in the amount that the withholding tax exceeds the tax payable on net rental income."

http://www.milliondollarjourney.com/canadians-buying-property-in-florida-the-tax-issues.htm


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## humble_pie (Jun 7, 2009)

hmmmn i don't recall that our old friend ticonline - the guy who was banned here - ever bothered himself to check out the IRS when he long-distance-bought his little phoeniz AZ investment ppty ...


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## iherald (Apr 18, 2009)

humble_pie said:


> hmmmn i don't recall that our old friend ticonline - the guy who was banned here - ever bothered himself to check out the IRS when he long-distance-bought his little phoeniz AZ investment ppty ...


Well he made 58% in the markets last year, he doesn't have time for silly things like the IRS.


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## AndrewSchultz (Mar 15, 2011)

iherald said:


> There is an interesting post on the Milliondollarjourney today with respect to the tax issues of buying US rental properties:
> 
> "For one, U.S based rental income would require the investor to file a U.S tax return every year which is a drawback in my eyes. The rental income is subject to a 30% withholding tax which is not included in the U.S/Canada tax treaty like when receiving U.S dividends (how investment withholding tax works). To get around this, KPMG recommends to file the U.S return with the election to pay tax on net rental income. The Canadian, in this case, will receive a tax refund in the amount that the withholding tax exceeds the tax payable on net rental income."
> 
> http://www.milliondollarjourney.com/canadians-buying-property-in-florida-the-tax-issues.htm


This is actually a really informative article. One thing that they didn't mention is that if you sell a property, but buy another income producing property, you can do a 1031 Exchange. I don't know the rules regarding foreign parties doing an exchange, or if it is even possible, so I won't pretend that I do.

This is actually pretty interesting. I have lots of questions for my accountant next week!


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## iherald (Apr 18, 2009)

AndrewSchultz said:


> This is actually a really informative article. One thing that they didn't mention is that if you sell a property, but buy another income producing property, you can do a 1031 Exchange. I don't know the rules regarding foreign parties doing an exchange, or if it is even possible, so I won't pretend that I do.
> 
> This is actually pretty interesting. I have lots of questions for my accountant next week!


The 1031 Exchange I don't think would work for Canadians. I am not an accountant, but I suspect that if you have a capital gain, you pay it, and move on.


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## Berubeland (Sep 6, 2009)

My thoughts on property buying in the US are as follows and I'm sure Andrew would agree, you need to check in on your property manager and your properties on a random but regular basis without notice! 

Also ask for hard copies of signed leases, and tenant IDs so if required you can fire your property manager. 

It is my opinion as well that if you decide to buy in the US you can't really just buy one income property. You have to buy a portfolio or it isn't even worth it. The travel expense will just kill all your profit for the year. Even if you put down cash money of say $50,000 and get $12,000 in rent, a ticket to CA will cost you $800 plus a couple nights at a hotel $300 plus food a rental car. Next thing you know you just spent $2-3000 on one trip to visit your property. It isn't hard to do. Now if you buy 10 that's different, or if you enjoy an area and want to live there yourself as a winter get away. 

Yes there is probably no better time to buy a property or 10 in the US but I think that there is a lot for an investor to learn before even buying. I know some very smart investors that have gone to the States and got their feathers plucked. One in particular ended up losing his 300 unit apartment building in Texas after his partner/property manager failed to pay the mortgage and the place got auctioned. Guess who bought it? The partner/property manager. So the idea of a bunch of retiring boomers trying to buy "investment" properties from a foreclosure bus chills my soul. Can you say victim?


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## kcowan (Jul 1, 2010)

Berubeland said:


> One in particular ended up losing his 300 unit apartment building in Texas after his partner/property manager failed to pay the mortgage and the place got auctioned. Guess who bought it? The partner/property manager. ...


Great story. The idea of regularly randomly checking in on your physical investments is a great one. Just announcing that you are watching can have a beneficial effect, as long as the one watched cannot verify it.

Trusted partners need to continually renew that trust. It is just business.


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## iherald (Apr 18, 2009)

Berubeland said:


> My thoughts on property buying in the US are as follows and I'm sure Andrew would agree, you need to check in on your property manager and your properties on a random but regular basis without notice!


I totaly agree. That's why I'm looking in the Western NY region, since I live in Toronto and it's an hour and a half drive. I'd be worried about Texas properties or California ones for that exact reason.

I think the same idea of being close to your properties or at least checking on them relates to both Canada and the US. I don't know how comfortable I'd feel buying a place in BC, only because I'd never have a chance to go look at it.


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## Addy (Mar 12, 2010)

Another good article on Canadians buying property in th US:

http://m.torontosun.com/17752631.1


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## iherald (Apr 18, 2009)

I just saw two videos on the Globe and Mail site. The first is about a few issues of buying property in the US:

http://www.theglobeandmail.com/glob...ng/considering-us-real-estate/article1949510/

The second is about financing the purchase:

http://www.theglobeandmail.com/glob...g/paying-for-your-us-property/article1949508/

There are also some good question and answers here, mostly about snowbirds:

http://www.theglobeandmail.com/glob...uld-know-before-heading-south/article1440917/


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## marina628 (Dec 14, 2010)

If you buy a property in USA ,short term rental on a resort with in house management is way to go ,they care for property ,housekeeping etc .Generally it is about 20-30% they take to cover all expenses .My friend has 5 of these in USA/Caribbean .You enjoy it yet it is income producing when you are back home.I will probably wait til end of 2012 to buy in USA .


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## Berubeland (Sep 6, 2009)

It's totally true of any investment... 

You must watch what's going on or bear the consequences. There are literally thousands of cases of all kinds where people get ripped off and scammed from "totally trusting" someone. It's your money make sure people are doing their damn jobs!


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## harnit (Dec 9, 2013)

Hi Guys, 
Hope all of you are doing well. 

I am looking into properties in Kaisertown, NY. This will be my first investment property in Buffalo, NY. I am very much interested in the investment in this city. Do you think it is a good idea to buy a property in this part of Buffalo? 

The property falls on Weiss St. I had a look at the property and it is in a very good condition. Do we get good tenants in this area though? How much are we looking at for the 2 unit property? 

Highly appreciate your help & time. 

Thank you! 

Harnit


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## harnit (Dec 9, 2013)

Hi Guys, 
Hope all of you are doing well. 

I recently bought a property in University Heights. This is very close to UB South Campus. I am looking for a property manager for this multi family property. Any recommendations? 

Harnit


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## james4beach (Nov 15, 2012)

It's already been mentioned that one you own us property, you'll also have to file IRS returns.

What people are forgetting is that now if you spend a lot of physical time south of the border (substantial presence test) you will have become a US Person and must file disclosures of all your bank and brokerage accounts under the the FBAR and FATCA. This can cost you hundreds in accountant fees and you risk 10k penalty per violation if you fail to disclose something. For instance TFSAs require complex forms when reporting to the IRS


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