Hi teepeeseller,
Here we go, it is definitely a great read and to think I nearly took note of Ajays recommendations without looking at these facts and figures.
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Buffalo, NY Demographics At least once a week I’m asked by a potential investor, “Why should I invest in Middletown over Buffalo, NY?” After laughing for an hour I get down to some very simple numbers and let the numbers do the talking so as to not appear biased. Since I am of course biased I will use the numbers as fact, and the opinion of course is just that - my opinion. I do state my opinions with the fact that I have actually been to Buffalo and stayed there for a few months years ago, as well as traveled the entire state of New York for five months. Not some quick two week hop-over, and not enough to make me an expert, but certainly enough to have an opinion on the area, especially when it is completely backed by factual numbers and data.
Unfortunately, the reason I get asked this question so often is due to a few UK fellows who seem to believe it is a good investment area, and thus tout it as such on their websites. Of course, they do so trying to obtain a hefty finders fee! The one guy admittedly has been to Buffalo for a grand total of two weeks, and if this makes you an investment expert able to offer advice to others, then best of luck to those who follow this advice! Personally I would never pretend to know an area if I had visited for two weeks, especially in an entire different country, but I guess those small details get lost in the marketing!
Now for some real facts on Buffalo.
Buffalo, New York, was recently ranked the second poorest US city by the US Census Bureau. A total of 29.9% of the population is below the USA established poverty line. Only Detroit, Michigan, was ranked lower due to the numerous closings of car factories, etc. If you happen to be a property investor in Buffalo, those 30% of people below the poverty line are known as YOUR RENTERS. Do you think they will make their payments on time? Do you think they will take good care of your property? Of course not, and when you’re factoring what seems like an amazing 25% yield in your calculations, be sure to factor in all the damage your tenant will do to the unit, effectively lowering the yield by half in many cases.
Even if you do get lucky, find great tenants, get paid on time, and have little to no damages, who are you going to sell your property retail to and where is the capital appreciation going to come from? Poor people do not buy houses, improve communities with spending, stimulate economies, work successful decent paying jobs and pay taxes, and so on. Poor people obviously suffer more with bad credit, lack of job history, etc., which is required to obtain a mortgage to even buy a house.
Buffalo Population:
This one is easy. Why is everyone leaving the city in droves?! In 1980, Buffalo had a population of 357,870. In 1990, Buffalo had a population of 328,123, almost 30,000 less than ten years earlier. By 2000, the population had dropped another 35,000 to 292,648. Then, just six short years later in 2006, the population again had dropped over 16,500 more people to just 276,059! What is so bad about Buffalo that so many people are dying to leave the place? A loss of 81,811 people in just 26 years is not only significant, it is absolutely devastating to a local economy and housing market. That’s bad enough, but the worst part is in 1950, Buffalo had a population of 580,132. The population has been declining rapidly for sixty years and there would be ZERO data to say that trend is going to stop and reverse. I thought this Buffalo place was supposed to be a “hotspot”? It seems the only people that could consider numbers like these “exciting” are property pitchmen hoping to make fast money off of an already severely depressed crime ridden area. It is also why I can find a thousand houses in Buffalo to buy for less than $20K US - they are all empty and abandoned! These statistics are taken directly from the US Census Bureau.
Ah yes, crime!
Now every area is going to have a bit of crime, but some are obviously much worse than others. In 1999 Buffalo had 32 murders. That is already a huge number well beyond the US average per capita. That number has increased nearly every year since, and in 2006 there were 74 murders! Doesn’t sound like a nice safe place to be investing my money. The rest of the numbers do not get any better. In 2006 Buffalo also had 174 rapes, 1708 robberies, 2001 assaults, 4447 burglaries, 8864 thefts, 2125 auto thefts, and 159 arsons! Over 19,500 reported crimes alone, and imagine the real numbers that were not even reported! These statistics were, of course, taken directly from the FBI.
Now if this is such a great hotspot to invest, why is crime up every single year while population goes down every single year? Shouldn’t the crime be down when there are less people to commit those crimes? Did the great property mogul who recommended Buffalo and upstate NY to you do any research into these areas like he claims he did on his website? Even more important, has he personally invested money there or is he simply making money off of your investment?
If all these numbers are confusing to you, and you can’t figure out exactly which crime is bad, which is benign, etc., then let’s go with one simple number: the US Crime Index. This number averages all crimes reported for each city in the entire US and gives it one score based on all factors involved. The average in the US is 323.2. This average is skewed upwards by crime-notorious cities like Detroit, Los Angeles, Chicago, New York, Atlanta, Miami, etc. They are many of the big cities that get the most headlines for crime.
So basically if we have a city that is a 200 rating on the scale, they are much lower in crime than the average, and by now I’m sure you can guess where Buffalo falls: 725.7. More than DOUBLE the crime of the average US city including the worst ones. Obviously this number correlates well with the poverty, the low income, the very low median housing price, etc.
Housing:
Speaking of median house prices!
Buffalo’s median house price is $60,800. That figure has leaped, jumped, and flown from a pathetic $59,300 in 2000. Not even close to keeping up with simple inflation! Obviously a higher median would be beneficial if you plan to sell for retail as you can hope to achieve the median price if you have the average house for the city. If you spend $30K buying a house and $20K rehabbing it to retail standards, and you hope to achieve a median house for the area, what profit will you make after taxes, conveyance, realtor fees, closing costs, etc., if the price you shoot for is $60,800? You’ll be lucky to break even. The other problem is good luck finding a mortgage below $50K USD! 97% of US mortgages have a minimum of $50K they will lend as there is no profit involved for them with management fees at a loan value lower than that. Obviously if the median point is $60K then there are a ton of houses below that, thus if you get an 80% LTV loan on a $60K house you are right at the cutoff point for not qualifying.
Income:
I won’t go into too much detail here, but Buffalo’s median household income is $27,300, while the state average is $49,300, making Buffalo roughly half the normal New York state median income. This doesn’t mean everything as the area is obviously quite cheap to live in, so wages will keep pace with that, but unfortunately without better paying jobs houses can’t raise in price too much or the median family couldn’t afford them!
Climate:
Well, if the economy is bad, housing is bad, people are leaving in droves, and there’s a good chance I’ll be shot at, is it at least a temperate climate? Being about as far north as possible in the US bordering Canada, the answer would be an emphatic no. It has nearly 100 inches of snowfall per year due to being right on Lake Erie and having lake effect snow. I don’t mind a bit of snow at all, most US cities have snow, but foot-deep snow being a common thing is a ‘no thanks’ by me.
In summary, a quick browse of a few message boards will tell you all you really need to know. People are leaving Buffalo for all the reasons stated above. They are sick of the cold, sick of the housing prices being stagnant and falling, sick of the lack of decent jobs and the abundance of minimum wage jobs, sick of a poor local healthcare system, and sick overall of a failing economy with no new business opening and most downtown storefronts vacant for years. Obviously, do your due diligence on any area you decide to invest in, but someone who tells me of this great hotspot and somehow fails to mention this many negatives is someone I would be very leery of!
Best regards and much success to all! "
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