Breaking into the Providence Market during Corona 2020

[Lindsey Costello]

Hello! I am a big fan of the BiggerPockets community, and just getting started on my real estate journey. They say there is no better time than the present, but it is definitely a little harder during a pandemic. I'm in the market for a small multifamily (2-4 unit) which I will plan to house hack one of the units. I'm interested in the East side/Hope street or the Atwells/Broadway areas of Providence, RI. It's a pretty competitive market. My problem is I have not been able to walk through a property in person due to owners not being comfortable with the current social restrictions. The property I'm interested in looks like it could need a decent amount of work, and I'm trying to estimate renovation costs. Any advice on making offers on properties without seeing them in person- such as inspection clause language? Given the current circumstances would one consider offering a lower offer subtracting the renovation costs? I'm super new to real estate and the Providence Market, so any advice, guidance, or input is greatly appreciated! Hope everyone is staying safe. 

[Anthony Thompson]

@Lindsey Costello welcome to Bigger Pockets!

I would definitely consider offering a lower amount due to the difficulty of estimating renovation costs right now. Either that or push the timelines out 90 days or however much you're comfortable.

I don't know that the market is as competitive as it was just a few months ago. I've heard multiple reports of buyers backing out and private/hard money lenders refusing to fund deals - at least on the rehab side.

I'm less in touch with the house hack / regular buyer side but anecdotally it seems like fewer people are out looking right now.

So if it were me, I'd probably be a little more demanding in terms of either asking for a longer timeline, or a bigger discount for repairs.

You might also consider paying someone to do an inspection without being present yourself. Normally I'd say, absolutely be at the inspection because you'll learn a lot and can ask questions as you go.

However, if you're intent on closing, want to minimize your risk, and can find an inspector willing to inspect in this environment, that might be an option. You can ask her/him questions by phone before and after the inspection, and of course you'll have the inspection report itself to look at.

One thing that might come up though, especially with a multi-family property, is that if the units are occupied the tenants may refuse to let an agent or inspector in. That happened to me on a property appraisal just last week actually. So you want to confirm access to all units will be available, before you pay an inspector to go out there.

If access to all units won't be available then you should be aggressive about getting a bigger discount for repairs since you'd basically be taking part of it sight-unseen.

I'd also recommend making sure you're OK if you aren't able to collect rent in any of the units for 3-4 months. Will you be able to float the property for that long on your own? If not, it may be much better for you to wait until this passes. If you can, then I think you should ask for (and get) a decent discount for buying at this time.

And remember, just because the current owner was able to collect rent - or claims that s/he did - doesn't mean that once you take over, you won't have a building full of non-paying tenants. That's a wordy way of saying, don't trust what the owner says about whether the tenants are paying or will be paying. Assume the worst and ask yourself if you're prepared to cover that scenario.

The areas you mentioned are definitely better areas, so there may not be as much concern about non-paying tenants, but I do recommend using some caution here since these are uncertain times.