Has anyone had their property foreclosed on in the US? My property in Buffalo has been ruined by bad tenants and poor property management. My new property manager has suggested to leave and let the local council take it back and sell it. I am not comfortable with this as I still have a mortgage on it. has anyone any experience of this? And if so, what are the consequences for an Australian citizen?
Thanks
It will be difficult for them to chase you here but not impossible. However your credit rating will be ruined. How much is the mortgage on the property.
Nigel Kibel | Property Know How
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Nigel
The mortgage is $60k. Will it affect my credit rating here in Australia? I thought they were not international.
Thanks
John
Out of curiosity:
Who is the mortgage through??
Why Buffalo, New York??
Define “ruined”.
Define “poor property management”.
When did you purchase the house??
Who did you purchase the house through?? i.e. Buyers Agent??If you successfully got a mortgage through a US bank then presumably your deposit was sizable (upwards of 50%). By US law, you can walk away from a mortgage with a US bank. Simply send the keys back to the bank. Your credit rating will be toast however. Not to mention your deposit. I’m not actually sure if this will impact upon future loan applications in Australia.
If the mortgage originated in Australia that got you the house in Buffalo……Well, the Australian bank will want its money back…….with interest.
It will not effect your credit in Australia, however if you ever want to buy in a good market then do not walk.
Buffalo is not a good market, whatever you do dont now go Detroit
There are good opportunities in America but it is a matter of doing careful research first
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thejajco wrote:NigelThe mortgage is $60k. Will it affect my credit rating here in Australia? I thought they were not international.
Thanks
John
Yes in some instances. It wont show up on your credit file but some lenders specificall ask questions around being in default.
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Nigel
To save me hours of Googling and research.
What’s wrong with Buffalo??
What would attract someone to buy an investment property in Buffalo? The bank must have had some faith in the deal if they helped fund the deal.
I don’t recall Buffalo ever being offered/advertised/portrayed as an appealing option for overseas investors.
For example, most people know Detroit is a basket case (unless you really know what your dealing – apparently).
cheersBelieve me Buffalo was a basket case before Detroit
Buffalo was one of the wealthiest cities in the United States in 1900, now its one of the poorest. Its a bad place to invest
Nigel Kibel | Property Know How
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New York is not a mail in the keys state. There are 12 states in the US that are though and only for owner occupied, every state in the US has the ability to sue on the note.
My guess is this is a vendor finance transaction. Not confident any lenders exist in such a terrible market as buffalo,,, here Nigel and I agree… Although I do not agree in Nigel's assessment of credit risk vis a vi a default,
Your description of your landlord experience is typical of buffalo, Rochester, Detroit.
Fascinating.
It would appear Jajco’s options are not so simple.
It would also appear the current property managements advice to walk away and default could be bad advice.
Jajco’s, how’s it panning out?? and good luck.Disagree. If its vendor financing then take a walk no worries of credit problems or deficiency judgement that could beinformedinformed
So far the feedback has basically been: Avoid Bufallo.
You would have to question why a financing vendor would take such a high risk borrowing money into a bad market.Biggaz
Here is the history of investing in Buffalo:-
In 2005 Steve and Dave Bradley bought 33 cash flow positive properties in Buffalo. A bunch of us, from these forums followed their lead and bought property there through bird dogs who set up all the initial contacts on the ground there. The returns were 20% a figure at the time I thought was too good to be true. When Steve and Dave went their separate ways, Dave kept the Buffalo portfolio.
Getting finance was incredibly difficult but eventually we managed it. It cost an arm and a leg with a fixed rate of 9%.
Buffalo has severe winters and so roofs can be a problem. The roofs we were told had 10 to 15 years left in them started to crumble pretty quickly.
The property management issues were there from the start. It was very difficult dealing with issues in the middle of the night our time. The tennants would often stop paying rent, have to be evicted and then they would trash the places when they eventually left. Usually the damage was between $3k-$7k. So the margins dropped through the floor. We had drug dealers as tennants and the police smashed in the doors to get them. The property was closed off for a time then we had to apply through the courts to gain access again.
These are the sorts of issues you deal with when buying into a low socio-economic area. That is what worries me about some of Steve's recent US deals. They appear to be in some dodgy areas in Florida where I would think the same tenancy issues may occur. It only takes one bad Tennant to destroy the margin for the year.
Nigel would know the good areas to invest in as he has been around long enough to get a very good feel for them, but I would not go anywhere near America for investing unless I was close enough to get over there and deal with the issues first hand. I never knew what was actually happening with repairs. The bills just kept coming.
I don't want to want. It just does not sit comfortably with me. But I know a lot of Aussies have done, so I wanted to know what their experiences were. The Americans are quite candid in their advice. "Don't waste another cent…"
Hope this gives you some background.
Cheers
On the surface, I would presume this was a hard money deal. If that is the case, then you can walk away with no recourse. Of course you'll lose the deposit but if you are invested into a black hole, it's more of a business desision on your end.
Management wants you to walk probably because they are tired of managing perhaps because of the location, which indicates mass inferiority from your post about bad tenants. They they would possibly try to get the listing once you are out of the deal. Who knows.
Seems the lender has no recourse here. I read a lot about how bad Buffalo is. I was offered a really good value opportunity (on paper) as a JV. I went to visit Buffalo and although I really liked their chicken wings, I'm not investing money there. I wasn't sold at all. Not even close and I made up my mind within about 2 hours from landing.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
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Email Me | Phone MeWhen I decided to establish a business in Florida I had two things that had to happen.
Firstly I had to have ownership in the business because that way I am accountable for what I recommend
Secondly we had to have a property management arm so that invest would know that there interests were being looked after.
Personally I have never ben to Buffalo or Detroit for that matter, however you don't need to go ad see that these are third rate markets at best. It is clearly that there are other good people on this site like Cheeves and Jay and Alex.
What is important is to do your due diligence carefully
Nigel Kibel | Property Know How
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Jay certainly wasn't VF.
I did dozens and dozens of US loans with WAMU in Buffalo and New York between 2003 – 2006.
Ah those were the good old days.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks everyone for your input.
Thejajco, thanks for your candid response about your experiences in Buffalo.
I am very interested to hear how things play out.
Hope you get the best outcome.
Richard,
there ya go. Wamu and country wide making these investor loans in crappy and non sustainable markets,
where are wamu and CW today? OUT OF BUSINESS WITH BILLIONS IN DEFAULTED LOANS!!!!
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