Story of a Yield Hunter

February 25, 2012

A lot of people ask me – how on earth did you end up in Buffalo? In fact that’s often one of the first things people ask. So here is my story.

In 2000, Hackney East London was a poor neighborhood. When I moved there, my colleagues in the city enquired on my sanity. ‘But I can walk or cycle to work’ I reposted. ‘And it’s half the price of Islington, a mile away.’

East London

But the main interesting things were:

1. Gross Yields were about 15%.
2. The area was jam packed with poor artists and creative people.
3. The architecture was of good quality, with many parks and good bus connections
4. It was right in the centre of London
5. There was the outside ‘lottery ticket’ chance of a new tube line and, perhaps even the Olympics.

Balancing this with quite attractive buy to let mortgage rates, and I had a net return of 30% a year, plus potential capital growth. The area was ripe for gentrification.

Zoom forward to 2008 – yields were down to 6%, prices had more than doubled, and ‘capital growth’ had become a cliché. The bargains simply weren’t there anymore.

Tallinn, Estonia

I’d been looking round Europe for years and years trying to find a new ‘Hackney’ – a diamond in the rough with high yields, and great potential. Estonia, in Eastern Europe had had the same boom and was now illiquid and crashing, and with it potential for bank finance (which could have stabilized the market) dropped to almost zero, and as young people left for the west the demographics were looking ever more precarious. Despite the crash in Europe, I could still not find a decent high yield/economic growth story. That’s when I came across Western New York.

Normally, as any pro investor will tell you, a yield of over 20% usually signals ‘danger – high risk’ So it took a while and a few visits, first to Syracuse, then to Rochester and Buffalo to try to piece together the whole of the puzzle – local knowhow, and most importantly competent local management. I spent hours and hours looking through economic stats and rental history to decipher exactly why were yields here 30% while in San Francisco or Seattle they were 4%, and even in Orlando or Las Vegas they were 6-12% . Even just across the river in Hamilton or Toronto, rental returns were a fraction of what could be had in Buffalo. Buffalo had the same yields as US’s perennial economic whipping boy, Detroit. But Buffalo wasn’t Detroit. Unemployment in Buffalo (at 7.9%) is below the national average (8.3%) compared with 10.8% in Detroit. The population had stopped falling; the GDP per capita was in the top ten large Metros from 2001-2009. This means higher value work was being done in Buffalo. Better quality jobs. I looked into this more and yes, contrary to Buffalo’s image as a ‘blue collar city’ – the biggest (and growing) sectors are also recession proof – Healthcare, Savings banks, University related jobs.

So here we had it. A city that was valued (wrongly, in my opinion) the same as a one-industry town like Detroit. A city with economic growth and value add. A city with some of the most attractive turn of the century housing stock in the country. A city that despite some quite high business tax, is one of the cheapest places to live and grow a business in the US.

Western New York

Coupled that with a good partnership with the biggest buyer in the region, an excellent management team, and a focus on 5 specific neighbourhoods where we’d identified as ‘gentrifiable’ as Buffalo grows again, and here I had it. A new hackney. A new place where, whenever I found myself with some spare cash, I knew I had a home for it at 15%+ return net a year.
As time goes on, along with our growing investor family, we’ve already seen steady capital growth in the areas we focused on, and an improving quality of tenant, but we still have a good few years yet of ultra-high yields before the imperfect market we call real estate catches on and catches up.


Author Alan W. Findlay is a Partner in Abbotsinch Capital with more than 15 years of experience in real estate investment. You can contact Alan by E-mail: or by phone: +44 (0) 20 7193 2079.

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