Thoughts on Providence or neighboring towns in RI ?

Question

HI Everyone,

I am new to real estate, and I am interested in multi-family investing probably in RI. I am based in Boston, MA and it's probably a lot cheaper to start in a market like Providence. Any thoughts or recommendations?

Reda Bennani · Answer

@Anthony Thompson thank you for your reply. I am in the process of reading the book on long-distance investing and it is definitely interesting. The cash on cash return in MA doesn't seem to make a lot of sense in my opinion. What are your thoughts? any other markets that you would recommend in the midwest or the south?  I am also interested in single-family homes or condos. Thank you in advance,

RB

Reda Bennani · Answer

Thank you @Fan Bi for sharing your experience with me, I see that you are located in Boston. I would love to connect with you to learn more about how you see the market etc..Happy to connect.

Fan Bi · Answer

@Reda Bennani Always good to see new investors hit the market - helps maintain prices ;)

We've been investing in PVD for the past few years and can confidently state that nothing on the MLS in the past year pencils to a good cash-on-cash return. People have been calling the 9th-inning of price appreciation for at least three years!

The best hope is that COVID creates compression from distressed sellers but given how much stimulus has been coming from the Fed and Treasury, that likely won't happen for another 90 days (at the earliest).

Granted, if you have wholesale connections, that's a different ball game. We've only been fortunate enough to have done one wholesale deal via @Jesse Andrews (thank you Jesse). Most wholesale deals we've seen are worse than deals on MLS!

Reda Bennani · Answer

@Amanda Davidson thank you, Amanda, that makes sense.

Amanda Davidson · Answer

@Reda Bennani He means that there aren't a ton of multi-families on the market, and good ones go quickly - often with several offers being submitted.Providence has many different neighborhoods, with various market values, rent values, quality of tenants, etc. As does it's neighboring towns. There isn't a quick or easy answer to your question. You can find out some of this info by searching each area online for current rent and sales prices and then comparing them.

Reda Bennani · Answer

Thank you Sam for your input! When you say competitive, what do you mean? where can you find Deals? and any idea on what neighborhoods are worth targeting/focusing on and how much rent is a 1-2-3 bedroom goes for?

Thank you!

RB

Sam Albert · Answer

Hi @Reda Bennani Providence is considerably more affordable than Boston, to begin investing in multi units. Are you looking to purchase turn-key properties? How do you plan on purchasing?

Keep in mind multi-units are SUPER competitive in Providence County. So, if you're thinking about purchasing a multi unit in PVD, be ready to compete. Although prices still make sense, with the current market rents and interest rates, buyers should be ready to pay a little over asking for 2-3 unit properties.

Those are just some of my immediate thoughts. Aside from that, Providence, and it's surrounding cities, is an excellent place to invest! Best of luck on your journey, and don't hesitate to reach out with any questions.

Anthony Thompson · Answer

@Reda Bennani if you’re going to start looking at other parts of the country there are a lot of factors to look at, like population in general, in/out migration, employment in general and also industry/employer concentration, etc.

Folks have been talking about the Carolinas and Texas as good places to invest for years, but you always have to analyze the market to find out if you’re too late on the trend or it still has steam.

I usually find it hard to make the numbers work well for single families. Condos can work but you have to watch the condo association fee closely and read the condo docs and meeting minutes. You especially want to know if there are any big assessments coming up and also if they’re going to have a problem with your renting out the unit.

As far as RI vs other areas of the country, I think it comes down to your comfort level. Generally I’m not crazy about RI’s economic prospects. There aren’t too many industries drawing people into the state, there’s a lot of brain drain up into Boston, and it’s not exactly business friendly. Population has been declining and we’ll be lucky if we get to keep both our Representatives after this Census.

However the one thing RI does have for you personally is that it is close enough to drive to if you had to, for example to go to the home inspection or if there was some issue your property manager couldn’t handle soon enough, or you wanted to check on the status of a cap ex project, or you needed to interview a different property manager, etc.

So it might fit the sweet spot for you in terms of being more affordable than your own back yard but still being “close enough” for you to have a comfort factor you might not have elsewhere in the country.

Reda Bennani · Answer

@Anthony Thompson thank you for the insights.

Anthony Thompson · Answer

@Reda Bennani I like Providence and think it’s a more affordable place to get started in rental real estate than Boston, but what are you asking about specifically?

No matter where you invest, you’re going to have to look at the purchase price vs. the rents, which means learning how to analyze rental properties. Prices in Providence are cheaper... but so are rents.

So you need to look at overall risk and return of any specific property, no matter where it is - though if you can’t afford the down payment for a higher priced property in Boston at all, then I can see why you’d look outside that market 😊

If you’re living in Boston though, you’ll need to have a good property management team on the ground since that can be a long drive. There’s a BP book on long distance investing and it’s been discussed in the forums a lot, too.

I’m sure some folks would argue it’s not “long distance” in the sense of halfway across the country, but I think it’s a non-trivial distance and is certainly a lot closer to long distance than local so I think it’s worth looking at long distance investing resources for ideas and help, too.