What am I missing on this duplex in Buffalo, NY

Question

I'm working on getting my first piece of property and am now looking in Buffalo, NY which is ~6 hour drive from where I live. The property is in a rough neighborhood, but after some repairs it should rent 1200 per unit for 2400 total. Cost to acquire is ~100k and I plan on spending an extra 15k on repairs.

Expenses: $1,225 (Mortgage, taxes, insurance property management)

Rent: $2400

Cash Flow: $1,175

Overall I'm looking for a low barrier to entry, and will be screening prospective tenants myself so I'm not too worried about the area being not so great. The neighborhood I'm looking in is a pretty rough, which is why homes are so cheap, but the opportunity is there to provide clean, safe, and affordable housing for a Section 8 voucher holder. In terms of exit strategy, I intend to keep the property long term.

Any and all advice is appreciated especially from folks in the WNY region.

Matthew Irish-Jones · Answer

Buffalo is a good city to invest in for cash flow with a low barrier to entry, but you need a great team in place to pull off what you are trying to do.

Timothy Smith · Answer

@Andrew Jaquez hi and welcome (potentially) to Buffalo. Short comment here, but I’m happy to connect with you and give you some pointers from the perspective of someone who lives and invests in Buffalo. Beware cheap houses that need work that is less than what it costs to buy them. That’s usually a sign of being in a management-heavy neighborhood and at least in Buffalo, low opportunity for forced appreciation. I’m also a bit skeptical of an all-in purchase/rehab at ~$115K grossing $2400/mo in rents. Six years ago, yes. Now, not so much unless you are buying at deep discount and are getting materials and labor much cheaper than normal.

Especially as a first investment, this might be more than you want to attempt being further away. If you can manage a house-hack closer to home that helps you build equity and net worth, while demanding a minimal down payment, I personally think that’s a better option.

Good luck and reach out if you want to chat.

Matthew Irish-Jones · Answer

Higher risk properties have more variable costs, vacancy, CapEx, maintenance, and potential evictions.  You may also be off on your rehab budget.  Its very hard to take a 100K property and get it in good working order for 15K using reliable contractors.   You should also consider that contracting costs are the same whether you are in a 400K property or a 100K property.  So as a % of total asset costs roofs, turnovers, etc... are a much higher % cost than on a more expensive higher rent roll property.

We manage a lot of properties in C class areas, there is money to be made, but you need a quality asset,  a great screening system, and you need to be able to realistically quantify the risk.

What neighborhood are you looking in?

Mathew Rebera · Answer

Hi Andrew,

I'm a realtor and do a lot of business on the east side. When there is a will there is away. Happy to answer any questions regarding the area and Buffalo in general.

For the sake of your example, how many bedrooms is it? $1200/unit can be possible on the east side, but I would need to see the listing and give you an estimate on rehab. Off the bat, a $100k double on the east is not going to look too good.

Shoot me an add, happy to chat.

Andrew Jaquez · Answer

I currently own nothing except an old Toyota and some savings from a solid W2 income. House hacking is definitely an avenue I can research more and that seems to be more fitting for a first time investor.

Thanks again for the info and for your advice. I'm going to heed your warning and look closer to home. Newburgh is the most interesting to me right now so I'll start there.

Nicholas L. · Answer

@Andrew Jaquez

do you already own something?  can you house hack locally?

definitely look 1-3 hours out instead of 6+.  there is an advantage to being hands on when you start.  you have Newburgh, the Lehigh Valley in PA, northern Fairfield County in CT...

here's what happens to folks who buy far away because the price point is low:

https://www.biggerpockets.com/forums/48/topics/1137397-balti...

https://www.biggerpockets.com/forums/48/topics/1160450-run-i...

https://www.biggerpockets.com/forums/963/topics/1195280-expe...

Andrew Jaquez · Answer

Thanks for the response! Totally understand your point on cash flow. I have been there in person and it was pretty much what I expected in terms of roughness. I'm in the NYC metro so even 1-2 hours out is pretty pricey, but I can do some more research. I was also considering Newburgh, NY which is about an hour away but very quickly becoming gentrified due to its proximity to NYC and the Hudson River.

Andrew Jaquez · Answer

This all makes sense, thank you for the response. I'm looking at the East side if Buffalo, so it's about a 10-15 min drive from downtown and the waterfront.

That's a great point on rehab costs, but for this property specifically there's not too much work to be done. It needs two sets of new stairs, new doors and paint throughout so i was hoping 15k would cover it. Of course this is my first time so I'm not an expert by any means just trying to get a sense of what would work and what doesn't. Overall the house is in livable condition but I want to add some value to it and keep it not just flip it.

Nicholas L. · Answer

@Andrew Jaquez

I think what you're missing is... there will be lots of other expenses, and there is a 0% chance you will cash flow that much.

It sounds like you've been going there in person to look at properties - is that right?  Out of area is very tough - tougher than advertised?

Can you find a market 1-2 hours away instead of 6 hours away?

What am I missing on this duplex in Buffalo, NY

Most Popular Reply