Interviews with real estate agents
Interview with Deborah Brenan
Investing abroad can be tough. A unique consultancy which aims to find reliable, income-producing properties for buy-to-let investors, is Brennan Property Investment Ltd (BPI). This expanding British-owned company concentrates on Western New York State, in Buffalo (near the Niagara Falls), Rochester and Syracuse. It’s headed by Deborah Brennan, herself a buy-to-let investor.
Deborah and her team carefully vet the properties. She commissions local professional surveyors and valuers to report in detail on the properties. Detailed property files and one-to-one advice enable professional and first-time overseas investors to make a decision. She guides her clients through the entire purchase process, usually within 4-6 weeks. Finally a competent management company is found to look after the property, generally producing 26% to 40% gross rental yields.
Why Western New York, for heavens sake?
We’re investors ourselves. We noticed that the properties in Western New York State on the internet were selling at a very low price. The typical purchase price is only £14,000 (+/- £2000) for a 2/3/4 bedroom house. But the amazing thing is the gross rental yields, which range from 26% up to 40%+.
Yields of 26% to 40%?
Most of our investors initially say “Too Good to be True!” Well, you have to understand, like parts of the UK, when shipbuilding, coal and steel declined it affected the regional economies significantly; similarly, these US cities went through difficult times 20-30 years ago. Yes, prices dropped some years ago, but have stabilized as a result of re-generation.
Some time ago, we made enquiries, travelled out there and researched the market thoroughly. Eureka! The yields were fantastic, the capital costs were low. Though there were various risks for the inexperienced, we found there are very low transaction costs, and there are very good tenants.
We started building our own portfolio – we have five properties at the moment. And then we started offering our service to buyers. It has worked very well.
Buffalo doesn’t have a great reputation
Recently Buffalo has become more of a service economy. Prices have stabilized. In fact the North has seen a 1% increase, while the rest of the US is still diving (except for North Carolina, which we are also into!).
In truth the proposition we provide is geared to regular positive cash flow; we are not necessarily looking areas that might shoot up in capital value - often that means over-supply and the lack of a secure rental income. That is not one of our selling points.
Shouldn’t I be skeptical about your yields claims?
Of course, but we are dealing with many investors who already have portfolios not just in their own country, but also in “challenging” areas such as Eastern Europe; they know what questions to ask! We want our buyers to interrogate us, inspect the details and check us out. In real terms, this is what people are receiving! We can provide our clients with references, past clients who can confirm that we achieve these yields for them. We are very good friends with all of them, because most of them buy one or two properties to test the market and then build up a portfolio to exploit the revenue.
But it is a market that needs careful navigation. That is what we are able to provide. We have hundreds of contacts. There are some locations where we won’t buy, and certain properties we decline, because the investor could be taking risks. It is our experience that provides Risk Avoidance.
Why wouldn’t the buyer just do the research himself?
You could, of course. But you'd need to put in a lot of work to build up the contacts and knowledge. Sometimes it is virtually impossible to get an e-mail reply from realtors in these areas of the USA. They feel it’s more trouble than its worth to them to deal with foreign investors they've never met. Unfortunately, there are too many property rogues about!
And YES, it is relatively easy to find properties as low as $5,000 - 10000. However D.I.Y. can be costly, and at worst disastrous. That ‘bargain’ property may have $35,000 of unpaid taxes on it, or need $25,000 of work done on it.
So you check it out?
We call it a risk assessment. We check that the property is suitable for our clients. We do our due diligence, and we lose 8% of the properties at that stage. If it requires refurbishment, we recommend that. If the properties pass our tests they go into our portfolio for the client to choose the property that is right for them.
The purchase process normally goes very smoothly and you can complete the whole transaction in 4-6 weeks. We have a series of information packs relating to each stage.
We then put clients in touch with all the contacts they need for a successful purchase, an attorney, realtor, insurance broker, finance contacts, amnd of course the property management team. All are independent from us, but we’ve selected them and we monitor them. They are excellent!
What costs are there?
We charge a £2,200 finders fee, but we value our regular customers and offer a deal, if they buy more than one property. We’ve put a lot of time into the property before it is released! For finding the management service, we charge no fee, though I’ve been told by many people we should!
So the total costs are our finders’ fees, the attorney’s fees, and a few other small items. It doesn’t amount to a huge amount.
Who are the typical tenants?
Renting is pretty much the norm in Western New York, 50-65% of the population rent. Home ownership in Buffalo hasn’t taken off as it has in the UK. There is a range of tenant types and we seek to source properties where reliable tenants want to stay a long time. There is huge demand for rented property.
How long have you been doing this?
We’ve been looking at the area for 5 years and offering a definitive property service to clients for over 3. We’ve been involved in over 300 property sales over the last two years. We have taken the time to refine the BPI proposition, and it works really well! We provide what global investors are really after – they want to buy a property with confidence, with maximum knowledge and minimum hassle i.e. all angles covered. And they want to make a good return. Though I say it myself, that’s exactly what we provide!
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posted by Tsais | 2009-04-06
r.e. investor, Los Angeles
Looking around various states in the U.S. over the years, I found some states have very high property taxes, and I'm not just talking about pricey coastal regions.I think I still remember Tennessee having properties high enough to almost equal paying rent on a place.How is that in New York State?