Insurance for Aliens

I learnt this week that we foreign landlords are paying increased insurance premiums because we are Aliens! My good friend 

Randi Strebb,SFR, 

Short Sale & Foreclosure Resource
Licensed NYS Real Estate SalespersonRoyal Realty 2010 LLC
2255 Lyell Avenue Suite 201
Rochester, NY  14606
(585)426-2600 office
(585)737-3881 mobile(585)426-2611 fax

has given me good advice here. We can get a better level of cover for a much lower premium from 

George Chernowski, CIC, MA, PROF.

President

Coppola Insurance Agency

3625 Seneca Street

West Seneca, New York 14224

(716)675-9403 office

(716)861-8648 mobile

(716)675-9370 fax

GeorgeChernowski@verizon.net

 

Just mention my or Randi's name whem emailing him for a quote.

You will not be disappointed!

Enter The Massive $10,000 Mobile Monopoly Giveaway Contest

Enter The Massive $10,000 Mobile Monopoly Giveaway Contest

Taxes

The landlord is responsible for paying all local property taxes. This includes the City tax and the County tax including school fees, user fees, registration, sewer and water charges. These are all payable whether the property is occupied or not!

Then there is the GST of 8% now added to all bills which were exempt until 1/1/10.
Then there is federal tax to be paid on profits. This is a major issue and will be the subject of at least a further blog post.

Payment of these bills is easier with some authorities than others.

With Rochester it is possible to set up a direct payment facility similar to a direct debit, so their bills are not a problem. Both Erie and Monroe County's insist on payment by check. Buffalo City will accept payment either electronically or by card but charge extra in both instances.Also the City of Buffalo computer cannot deal with addresses outside the US there fore we are left to pay by check.

The check remains the single most important means of payment in the US - even one of the insurance companies will only accept payment by check.

Facing up to reality

It is important to face up to reality. You will be involved in financing all sorts of work which is not your fault but because you are the owner is your problem. These come in all shapes and sizes
1. The violations described in the previous blogpost.
2. The consequences of the annual local authority inspections. The listed work has to be put right or your property will be blacklisted. This work, by and large, is damage, dirt or neglect by the tenant.They have no money to pay and an eviction is neither cheap nor a real option.
3. The cost of evicting a defaulting tenant. It will take at least 2 months, during which they will probably pay no rent and may well trash the property. The property will then lie empty for at least one or two months while it is refurbished ready for a new tenant. The property manager then takes the first months rent for finding a new tenant. The change of a tenant is definitely to be avoided almost at any cost.
4. If the tenant runs into a financial problem they may well default on their share of the rent - this may go on for months and you will never see the lost rent - it is still a better option than changing a tenant.
5. The cost of repairs following robbery, domestic incidents etc.
6. The cost of removal of pests, wasps, infestations, snakes. The cost of unblocking drains, other water damage.
7. The cost of repairs necessitated to maintain insurances.

The Property Manager

The Property Manager for an absentee landlord is the most important member of the Team. They are responsible for finding and vetting tenants, collecting deposits and rents, inspection and commissioning of repairs and manager of regular maintenance. In addition they account for their actions on a regular basis.
It is vital that they have a good working relationship with the Housing Authorities and Social Workers as many of the tenants have their rent totally subsidised by the public purse.
You need to be able to trust your Property Manager as they will oft times have to carry out emergency repairs without providing an estimate first.
There are a number of instances where the Landlord can be in breach of local ordinances. For example, you can be fined if the grass in the garden is too long, if the garbage tote is left out on the side-walk too long, if garbage or litter is on your front, if cars are abandoned(left untended for a few days) etc.! As the violations are posted to you which obviously takes time, the fine can easily double while the violation is in the post. A good manager manages to get these bills reduced or withdrawn.
It is for this reason that many managers recommend lawn trimming at least once a week.
When the Manager submits his monthly or quarterly accounts he will charge a fee of 10% on the gross rental income and the first months rent for finding a tenant. At the end of the period he will deposit any surplus in your bank account or request you send a check to cover the shortfall.

Things you should have done/should do now!

You're the proud owner of your property. What you must have done by now is
1. Taken out house insurance - the best policy is to use a broker, even so their does not seem to be a lot of competition for policies. As far as I can elicit Foremost are most competitive on single properties and Erie and Niagara most competitive on houses of multiple occupancy. The most important thing to do is to ensure that they are kept informed as to whether the property is occupied or not. I tend to view the insurances as total catastrophe policies and have not claimed for the large number of minor incidents that can occur. I would like to hear of other's experiences in this area?
2. Opened a USD bank account in the USA. There are a number of options here. I chose to open a HSBC personal account in Buffalo. I made it easier by having a Premier account in the UK which means that you get no Bank charges in the US and it is easy and cheap to deposit or withdraw from the US account.
3. You must get an ITIN number from the IRS. I initially tried to do this through the US Embassy in London, who claim to act as an IRS office, but in fact after reading about how to do it applied direct to the IRS in Austin. A useful tip is that the help lines at the IRS are really good. Experienced tax officials are extremely courteous, knowledgeable and helpful. The process did take 4-6 weeks and you cannot really start it until you own your first property. I will deal with the whole question of tax and which forms to use in other blog posts. You must however get an ITIN number because I found that some of the Housing Agencies would not deal with you without one and I lost a number of tenants and several months rent because I obviously didn't have one Day 1.
4. A Property Manager from before Day 1 - this probably the most important area and I will return to it in many future blogs.

Taking the Plunge - Buying a Property

So you've identified your property, got your survey and appraisal - you now need an attorney who specialises in Real Estate.I have bought 10 properties and used the same attorney for all the transactions, both in Buffalo and Rochester. This has been the one side of my experience in WNY that has worked really well! My attorneys are Christopher J and Mariella Mikienis from Williamsville. As each of my purchases was less than $40000, no mortgage was involved and I have in fact financed the properties through a facility I have in the UK.
The procedure is that the Sellers Attorney forwards all the necessary title work to the purchasers attorney for review.the purchaser wires the necessary funds to his Attorney at times requested and these are held in a Trust account.
The Attorney reviews the title and the next you here is when he sends you a Closing Statement, which is basically his Final Invoice and a request for funds and also informs you of the Closing Date upon which ownership will transfer from the Seller to the Purchaser.
This Statement details the Contract Price and adjusts it for taxes and water bills either paid by the Seller in advance or owing by the Seller. It will also include the transfer of any security deposits or rents paid in advance by any tenant. The tax is usually a fairly large addition and the rent a similar deduction.
There is then a list of the Disbursements that the seller owes and will be settled and deducted from the sale proceeds. This is nothing to do with the purchaser but is an interesting insight into disposal costs.
The attorney then lists his costs which are added to the amount you owe to him and which must be settled before Closing.
These include:-
The sum from the closing statement
A wire fee for the transfer of money
Recording Fees
An overnight fee
His quoted attorney Fee
Title Insurance
A certified check fee
and postage for sending the documents to you.
These costs and fees in my case totalled approximately $1300.
You are then informed when the Closing meeting has been held and the deed recorded.
The property is then yours and the interesting part begins!

Is there a housing “bubble” in Western New York? By Julie Andrews

It seems all we hear about these days is how terrible the real estate market is. It’s all doom and gloom in the news with “foreclosure” prevailing as the new buzz word. While I cannot say I don’t feel for the people who are now being forced into desperate situations due to the subprime mortgage crisis, I will say I am happy for the people here at home. In Western New York this news barely applies to us. Our market is stable and predictable, and we like it that way. Low housing costs make this a great place to buy a home and mortgage rates are as low as they’ve been in twenty years.

Foreclosure

According to Buffalo Niagara Association of Realtors December of 2007 was a hot month (for the market, but certainly not the weather). They reported 862 sales which was a 5 percent increase from 822 the previous year. Full-year sales were up 3 percent to 11,138 from 10,806 in 2006. Buffalo area homes actually experienced a 9.1% gain in median price over the last quarter. Wait a minute… more sales and higher prices? This is not what we hear about in the news.

The truth is, in order for your bubble to burst there has to be a bubble in the first place. I noticed they never filmed an episode of Flip this House or Flip that House in Western NY. We’re all about value here. 1,800 square feet of living space in a stately colonial home in move-in condition for how much you say? $100-$150,000 should do it depending on the neighborhood. If someone was reading this from across the country they would think it was a joke. Lucky for us, it’s not.

Every day I get a call or an email from somebody wanting to buy a foreclosure because they must be cheap and there must be a ton out there waiting to be picked. But we will not be a statistic on the news this time. For record snowfall they can pick on us all they’d like but they can’t say our market is crumbling. RealtyTrac Inc., of Irvine, Calif., said in its 2007 foreclosure report that our area ranked 82nd in foreclosure rates out of top 100 markets across the country. Not too shabby, 81 major markets had bigger problems than us. Pardon me while I get cozy, I think I’ll stay for a while.

What Sellers should disclose to buyers in WNY - Colleen Kulikowski

By law, real estate professionals cannot fill out any sellers’ home disclosures unless the agent is the seller or a party to the transaction. If your agent can’t tell you, ask a lawyer if you need to sign every disclosure handed you.

Every state has its own laws regarding disclosures, so the forms will be different. A federal disclosure such as Lead-Based Paint is required for all transactions if the home was built before 1978. Chances are in most areas of Western New York you will need this form.
What should I disclose?

Material Facts are commonly referred to as anything that would affect the buyer’s decision to purchase or the price and terms the buyer offers. In other words, if you have knowledge about a defect, it should be disclosed. If a seller discloses something to me and chose to withhold this information from the buyer, I would have had to disclose it because now I had knowledge of a material fact.

Read Also: Things Sellers can do make a buyers day!

Part of this includes any repairs or enhancements that you have done on your Western New York home. For instance, there was a leak in the roof, we paid xyz company $x.xx to correct and we have not had any problems since.
What About Rumors?

Typically, buyers aren’t upset about these disclosures, even if they are negative. The problem lies in when they feel they have been lied to or tricked.

What is VIP Pricing

I got this from a Real Estate Blog for WNY
Several Realtors are listing homes on the internet with VIP pricing. What exactly is VIP Pricing? Well it is a way to get a home on the MLS with a lower price. VIP pricing is a technique to attract buyers to put an offer in on a property while at the same time pacifies a seller who may be reluctant to put their home on the market for a particular price because they don’t want to take less than a specific figure. In other words it is a starting point, they really are looking for a lot more than that price. Basically they are telling you what their bottom line is. Is this good or bad? It is different and affects what we are going to offer on the home. It is out there, and you should be aware of this strategy in selling.

Choosing the location

Buffalo is five hours behind GMT and is located in Western New York, about half an hour's drive from Niagara Falls. The area measures 50 square miles and is the second largest city in the state of New York. It borders Canada, with Toronto just two hours drive away. Buffalo has been less affected by the recession than many other cities. There are many development projects that have been either completed, ongoing or are set to begin. Buffalo has seen record investment recently, with over $3 billion in projects. New businesses and existing businesses that have expanded have resulted in an increase in ‘white collar’ workers, thus increasing the population and encouraging other companies to invest there. The real estate market remains ‘investor driven’ and has recently benefitted from the Obama first time purchasers grant. There are many portfolio owners there from all over the world. There are many bargains to be had, whether it is a duplex property with a high rental yield, or a single that will appraise far higher than the purchase price with a little work required, in areas of higher priced homes. Buffalo is coming out of a recession and is improving, there not been the large drop in house prices seen in other parts of the States and now is the right time to invest in one of the cheapest housing markets in the world.

Rochester is the third largest city in NY State. It lies an hour by car to the east of Buffalo, and is considered a sister city. It was America’s first boomtown, largely due to it being the biggest flower producing city in the world in the 19th century. Median Income levels are low, making it a city of renters rather than home owners. It’s home to a large number of international businesses, and is
the world capital of imaging technology and optical science, with the university of Rochester ranked number 1 in the country for optical science services. It has historically been a city of high tech industries, which is why is hasn’t seen the decline that other areas have in past decades. Indeed, there is a boom in highly advanced technological industries here as their economy diversifies further into the 21st Century. The main employers there are the University of Rochester, Wegman’s food markets, Eastman Kodak, Xerox and Viahealth (source- Wikipedia). The population during the last census showed an increase vastly due to the presence of the technological industries and associated employment there. The real estate market has not suffered in the same way as many other cities, and Rochester has the distinction of being named in the top 10 places to own real estate in the USA. (source-CNN). Property prices are slightly higher than Buffalo, but the rental yield increases also. Property prices are currently stable. The city has been developed at a faster pace than Buffalo, and similarly to Buffalo, there are some great areas to invest in.

Syracuse The name derives from Syracuse in Sicily, and is linked because of the salt found in swamps there centuries ago. It lies in central New York, about 3 hours by car east of Buffalo and Rochester. In the 1950’s to 1970’s the population increased dramatically due to the presence of car manufacturer’s in the city sparking mass migration to the area. The loss of this industry followed, and the population declined. It now has a steady population, and relies on less larger named employers, but instead has smaller businesses which do provide a certain amount of stability. Evidence of this is found in the multitude of active business districts in the city. The top 5 employers now are: Syracuse University, Medical University, National Grid, Wegman’s food markets and Oneida Nation. In 2007, Syracuse’s job growth rate tied with NY City for the highest in the state!
(CNN) Planning consent has recently been passed to expand the city’s current carousel centre which houses retail, leisure and business industries, into the proposed ‘Destiny USA’ project. This would be among the largest malls in the country! Creating thousands of new jobs and turning Syracuse into a huge
metropolis and tourist destination. Phase 1 of the destiny project is underway, phase 2 has been agreed. See the website http://www.destinyusa.com/ for more information on this amazing project. This is a must place to invest into, and is also ranked in the top 10 places to own real estate in the USA. The excellent positioning of this city within New York State ensures that it is a major route for all trade and commerce that passes from NYC through to other states below. Property prices are slightly higher and with the increased job growth and expansion plans, this will be a ‘hotspot’ for investors in the coming months and throughout 2010.

Buying Property

There are a number of people you need.
The Realtor who is in fact the agent for the Seller of the Property and is the broad equivalent of an Estate Agent, except that they are licensed. They are paid by the Seller.
The Home Inspector who will do a full inspection of the property and supply a detailed report and photographs. This report will detail the type of construction so you end up with a pretty good idea of how it was built. It will also list the defects and give recommendations ranked by urgency and the measures needed to effect repair. Typically his fee for the inspection will be $350 -$400.
The Licensed Appraiser who will inspect the property and give a financial appraisal of its worth by comparing with other property transactions on adjacent properties. This enables you to put the asking price in some sort of context. Typically the Fee for the Appraisal will be $200- $250.
The Attorney who will act for you during the conveyance. I will do a separate biog on the process.
The Property manager who will manage the property post completion. Again this will be the subject of a seperate blog.

1st step to acquiring a Rental Property in WNY - The Lie of the Land

Once having decided to invest in US property you should look at Forbes magazine who rate rental properties by city and state. Syracuse, Buffalo and Rochester consistently feature within the top 10 cities for rental real estate investment. This is because all 3 cities have large redevelopment programs and unemployment is relatively stable. These cities have been low cost housing zones for decades and have been less affected than higher priced areas.
It is possible to buy foreclosure properties for next to nothing but these are not really wise investments for those managing their properties outside the US. There are lots of empty and tenanted properties available usually 2,3 and 4 bedroom pre-war properties. Now by using Google street view and 3D birds eye view it is possible to have a really good look at both the proposed property, the condition of the streets, incidence of graphite etc., without ever thinking of visiting the area.
This research together with recommendations of local realtors as to districts, proximity to work, universities etc. can reveal a lot. Also if the property has a section 8 (SS) tenant it is regularly inspected by the Housing Authority to make sure its habitable.
If you go to the local authorities website you can see full details including a photograph of the property, numbers of rooms, value of the land and the resale values going back years. You also see the owners name and a record of the local tax and water bills and whether they are in arrears. It is a mine of information and is available at
City of Buffalo, http://www.ci.buffalo.ny.us/
City of Rochester, http://www.cityofrochester.gov/index.aspx?id=96
City of Syracuse http://www.syracuse.ny.us/home.aspx websites.
These websites are also very helpful as they contain lots of statistics and information about each of the cities.
These are all the background checks you would undertake to acquire a property in the UK.

Me and Western New York Real Estate

I had been looking for sometime at UK buy to lets in 2007/8 but frankly the yields were pretty boring and the houses in the south of England were unaffordable. HMO's were just starting to become the vogue as a means of lifting the yield but they really do need managing. With hindsight I'm pleased I gave it all a miss as some landlords are going to have some interesting refinancing problems in the not too distant future.In spring of 2008 I was at an exhibition at Excel where the Brennan's had a stand and as I have always had a fascination with the US, I've been to more than 30 states and many of them umpteen times, I looked at their stand and took in the Sales patter.
I was sold by meeting Colleen Bracchi who is their Realtor in Rochester, Colleen is a charming middle aged woman who clearly knows her onions and has subsequently helped me out of more than one hot spot since I became a landlord.
To cut a long story short betwen April and July I bought 10 tenancies, 1 double and 4 singles in Rochester and 2 doubles and one single in Buffalo. All but the Buffalo doubles were through Brennans and they were through Ahuja.
will tell you more in the next blog1

BTL Property in WNY

There is a wealth of property built between 1900 and 1940 in the Northern cities in the State of New York all for sale between 0 and $40000. There are a number of UK agencies who can supply these properties and advertise a steady supply for a fee, "having checked them out, surveyed them and found ready tenants". These properties are advertised at various net yields of between 15% and 30%.
All statistical information available reveals that indeed WNY is as good a place as any in the US to invest in property. These cities had their 2009 "Detroit" moment in the previous two recessions and the rebuilding and redevelopment of the three cities Buffalo, Rochester and Syracuse is well under way. These bottom of the market properties have not really suffered in the recent property crash as the values were pretty well at the bottom to start with.
There is an abundance of potential tenants, pretty much all on the equivalent of Social Security, to fill these bottom end properties. The stock comprises of 1, 2 and 3 family homes of one or two stories and typical US architectural style. The age of the properties means that however good the condition there is a fairly large ongoing maintenance requirement. The climate which is hot in summer and severe in winter adds to this problem.

Investing in WNY Real Estate from Overseas

Over recent years a considerable number of homes have been acquired in Western New York by aliens, particularly Brits. The British have a property owning obsession and it was inevitable that when the exchange rate was 2USD/1GBP, a lot of British investors would be attracted to the advertised net returns on renrtal homes in Buffalo, Rochester and Syracuse in Western New York.
Since the credit crunch the market for distressed properties has grown nationwide with supposedly incredible bargains available particularly in Detroit, Florida and Nevada. The purpose of this blog is to exchange experiences of investors in WNY, to review the services available and to share our ups and downs.
Presumably we could also create an internal market not just of knowledge and experience but also for the exchange of properties.