Springfield MA Market

[Jeff Bousquet]

I see a lot of 2/3 family's in Springfield MA for good prices. Does anyone have experience in this area? 

[Dick Stevens]

Springfield is mostly a pit.  That’s why they’re good prices.

[Dan K.]

Hi Jeff,

As Dick said, Springfield is a challenging location from a tenant perspective. For example, the unemployment rate, relatively low, is 6.5% versus MA's 3.5%

It's been a long time since I was more familiar with Springfield, so I'm not sure about the impact of the casino.

In general, similar to other working class cities like Fitchburg, in Springfield I'd imagine you'd fine the following conditions:

- Attractive Cap rates

- Medium vacancy

- You're paying a realtor or property management company to find tenants (in higher end cities the tenants pay the realtor fee)

- Section 8 tenants -- could be a negative or positive, depending on your view. Keep in mind you can't discriminate against them in MA

- The need to delead and if your certs are old there is a good chance a new inspection could come up positive.

- Monthly cash flow from day one

- More properties that are fully separated metered -- gas, electric, hot water all metered for individual units

- Significant increase in property management -- evictions, late rent not because somebody simply forgot to press "send," potential domestic issues, issues between tenants, etc. Of course these events can happen in A++ buildings and cities, but to me it seems more prevalent in cities like Springfield.

- Very low appreciation unless there is a large market shift -- major new employer, city takes many housing units offline via eminent domain, a college greatly expands without additional housing, etc.

The list goes on. As you can see there are pros and cons. It depends on your goals. My two cents summarize is that you can make some nice cash, especially for the northeast, but at the same time the units will be management intensive and given the landlord / tenant laws of MA, one troublesome tenant could wipe out many month's / year(s) of profit. You're not going to see much appreciation or rental increases. I am sure there are property owners just killing it in Springfield, so this is absolutely but my opinion.

Final thought -- In a city like Springfield I would go as big as possible and get into the commercial residential. Your risks in terms of a tenants is more spread-out. Additionally, the management of a bigger property does not linearly grow -- what I mean is that a 12-unit building doesn't require four times the management of a 4-unit building. 

[Jeff Bousquet]

I have a nice B property south of Worcester that has worked real well for me. This would be my first experience with a lower income area/C class property . I was hoping to get close the the college area, and focus on student rentals. 

[Ryan Jopson]

@Jeff Bousquet

@Dan K. hit the nail on the head in his summarization of the Springfield area. His pro's vs. con's overview couldn't have been said any better. I will add a bit more below;

The casino project has portrayed a great deal of "hype" with many of Springfield's investors/residents/community. Of course any incoming project of this magnitude will generate a vast amount of speculation, but personally I do agree with the popular opinion on the positive impact it will have. The casino receives ALOT of news coverage. There are multiple billboards spread across the surrounding counties and advertisements everywhere. Overall, I believe it does have the  chance to push property values as well as rents northbound. The amount of new jobs has already begun to stimulate the economy and small business growth.

"Attractive cap rates and medium to low vacancy" is spot on. Cash on cash returns can be found north of 15-20% in some situations. However, something important to note in this aspect is deferred maintenance. There are many older/outdated properties that are not properly cared for but may appear attractive on the surface. Burnt out landlords and mom&pop operations are also prevalent in the area.  Subsidized housing and different types of housing programs are also very common. With that, having properties de-leaded is something that any investor should very much consider as all of these programs will require it.

Like Dan mentioned, a lot of properties do have separate utilities. Something to pay close attention to is making sure there is a separate owners panels in 3+ unit properties. Here and there you will find common electric or gas meters on the tenants meter. This is cause for concern as there is liability you as the landlord hold if you fail to disclose the meter is connected to the tenants unit.

I would advise making sure you have a trusted, fully vetted property management company in place as you are bound to run into tenant issues, evictions, etc. Like Dan mentioned some properties can be "management intensive" so make sure this is accounted for when running your numbers and setting aside reserves.

Short term appreciation is almost non-existent. Especially in the smaller 2-3 family properties. There are some surrounding counties that have seen a major boom in appreciation over the past couple years but Springfield is not one of them.

Yes you will cash flow from day one if you "buy it right". This is a very sought after attraction that the Springfield market encompasses.

In addition; there are some "pockets" of the Springfield area that are far superior to other locations. In general, the city does vary from street to street. There are certain neighborhoods that I would strongly advise against. Driving or even walking the locations at different times of the day is one true way to get a sense for what it is like.

Ryan J

[Filipe Pereira]

The one thing that freaks me out the most about Springfield (and all of MA) are the lead laws the state has. I use to think CT laws were heavy on this, but boy was I wrong! MA brings it to a whole different level.

[Frank Chin]

I agree with the others on the assessment of Springfield Ma. I bought newly renovated condos there after the real estate crash in foreclosure in 1992. They originally sold for $110K to $125K when the project was completed but was only able to sell 40 units out of 102 in the building. There were over 60 units vacant for some time and were only able to unload half at a public auction, leaving another 30 units vacant.

I bought one unit for my sister as an owner occupied unit with her bidding at the auction. The price and condo fees were so attractive at $40K that after I paid an $8K down payment, she was paying less in condo fees and the $32K mortgage compared to the rent subsidize housing she was renting. Then a year later, when I learned they still have over 30 vacant condos, I figured I pick up another one for $40K, but this time the real estate agent said, they're going for $65K now. So I laughed and said "you're joking, you can't unload it for $40K, so you want $65K now." After some back and forth, they agree to consider my offer of $40K and I bought another one at that price.

So all in all I did OK, the cash flow was good, and when the market top came in 2003-2006, I manage to unload it for close to $100K.

The thing is, this is a brand new condo, but walk a block away, you got section 8 housing. And I used my sister as a PM for the rental. I was looking for more to buy, and her husband mentioned there are condos going for $8K. I thought he was talking about the down payment, but no, I can pick up an entire condo for $8K. But when I said I'll use my sister for PM for those, he said "no, it's too dangerous for her to go there". You have to hire someone else. And banks won't provide mortgages for them either.

And they have a tremendous drug problem and landlords bore the brunt of it. My brother in law knew of someone who retired, move to FL, kept his rentals in Springfield. Due to prolific drug activity at his rentals, the authorities threaten to seize his property if he doesn't take action to stop it. So he came back from FL to personally manage his rentals and see what's going on. What a way to spend a retirement.

But some people did OK. My sister's son in law is a rehab contractor in Springfield and says he did OK with landlords doing section 8 housing. I asked "how so"? He says some tenants trashed the units so bad that when he goes in, he has to put in whole new kitchens and bathrooms, and for some units, over and over again over the years. He says there's so many trashed that he does most of his business from it, especially landlords of apartment complexes.

Some years back, I looked at investing outside of NYC where I am and I'm told if I invest in MA, east of Worcester is good, and west of Worcester, most of it is like Springfield. I did look into the Boston area and vicinity, but for those prices, I might as well stay in NY

[Jorge Borges]

Hello. It's been 4 years since the last post on this thread. Since then has anyone changed their opinion or able to provide some updated guidance on the Springfield market?

[Joe R.]

Quote from @Jorge Borges:

Hello. It's been 4 years since the last post on this thread. Since then has anyone changed their opinion or able to provide some updated guidance on the Springfield market?

I've done quite a few flips in Springfield, MA over the past 6 years, and the market has changed, for the better, IMO.  In 2022, average sale price in Springfield is about $260K, there were 1150 sales in 2022, roughly equating to $300M.  Very liquid market for flippers in the better neighborhoods/pockets.  I do know people that rent in this market with success, but not without considerable headaches (I do not own rentals in this market).  Premier neighborhoods will attract professional types and command higher rents and even the less desirable neighborhoods fetch good rental income, but with it comes very hands on management.  I would be very careful buying in C areas and hoping for improvement.  There are many unfinished projects (promises made by MGM) around the casino, that are now gaining traction as MGM President Bill Hornbuckle and Mayor Sarno had a recent meeting to review the host community agreement -- the Sarno administration was vocal about MGM not fulfilling its promises to the City.  Lots of construction activity has been restarted around MGM.  Parking and crime downtown remain a challenge.  There may be some commercial opportunities downtown.  

[Jorge Borges]

@Joe R. Thank you for taking the time to respond with a great summary.

I'm more of a buy-and-hold investor and just starting my journey. I will continue to look at Springfield and am also exploring Longmeadow and East Longmeadow as I hear that location may be better suited for mid-term rental or rent-by-the-room (CoLiving) arrangements. I am going to try my best to stay away from C areas.

[Louis Siano]

Hi @Jorge Borges, 

Since this post overall not much has changed... Springfield had followed the national trend with cap rates being compressed but I am personally seeing them being opened up a bit more within the last few months but that could just be the winter season in general

[Lydia Bar]

@Louis Siano any there are specific areas that you would recommend investing in in Springfield , MA? what are the B or A neighborhoods?

[Louis Siano]

Quote from @Lydia Bar:

@Louis Siano any there are specific areas that you would recommend investing in in Springfield , MA? what are the B or A neighborhoods?

 there are no A or B neighborhoods in Springfield, MA... I would consider some areas C+ areas but B might be a stretch... If you are looking for a higher rent in relation to cost it is great. If you are looking for lower cap rates and higher class tenants I would recommend looking elsewhere.

[Ethan Piani]

What do people think about Springfield in 2024-2025? I am looking to buy my first Multi and the cap rates are halfway decent even with current market conditions. I also feel that since Worcester has become increasingly expensive, Springfield is next up.