Providence, RI Student Rentals. Know anyone selling a condo?

Question

Hello all, my son is starting school in RISD within next few weeks. Student rental are expensive and the make better sense to buy a condo and rent a bedroom to another student or even a 3-4 multi-family as away to invest and keep cost down for his living expenses.  Does anyone know of any good deals for either property types? Anyone willing to owner finance or lenders who are flexible?

I looked at several units yesterday but I'm not sure about areas and how it all works in Providence. I'm willing to put the time and work into this investment but the realtor I spoke to is a newbie and could not answer some questions.

Is Providence landlord or tenant friendly?

Any assistance and guidance is greatly appreciated.

Christopher Moss · Answer

Hi Vic,

Sounds like you have a phenomenal idea! My partner and I have specialized in Providence student rentals for the past two years. Here are some thoughts that may be helpful. I'm assuming your son doesn't have the financial history to afford an owner occupied loan without a co-signer. Hopefully the following advice won't be completely irrelevant if your son has a credit score of 800 and a five year job history!

Rhode Island Housing offers a conventional 5% down, owner-occupied loan that's slightly different to the standard 3.5% FHA loan. Why put down 5% instead of 3.5%? Well the FHA only allows you to have a co-signer on single family purchases. The FHA does not allow co-borrowers on multi-families. RI Housing allows first time home buyers to utilize a co-signer on a single family or a two family.

Why purchase a condo when you can buy a two-family with three bedrooms in each unit? A very conservative rental amount per bedroom for student rentals is $500/bdr. My partner and I charge $550 and we're currently have 18 units fully occupied. The biggest players next to PC get as much as $900/bedroom! Lets do some math:

Worst case scenario and you buy an above market value two-family in the Washington Park area (near JWU Harborside) for $250,000. PITI will be close to $1,700 with the owner-occupied tax rate. Your son lives in one bedroom and you collect $2,500/month in rent from five other students. Of course, some of the $800 difference will go to expenses, but your son will be living rent free, learning real estate first hand, and building equity for four years of school. That's worst case scenario. Think about the possibility if you work hard to find a two-family for well below market value!

I work very closely with a mortgage broker who specializes in the product. Feel free to contact me if you'd like to discuss further.

CJ

Anthony Thompson · Answer

@Vic Lopez congratulations on your son starting school at RISD. It’s obviously a very competitive school so you must be very proud!

Providence and Rhode Island is fairly balanced actually, maybe a little more favoring tenants in practice but still reasonably decent for landlords. My understanding is that it is a lot better than Massachusetts, for example, in terms of landlord tenant laws.

Good deals are pretty hard to come by for most property types these days, but on a per unit basis you’re probably going to do better with a multi family then a condominium only because with a multi family you’re just competing with other investors to buy it, while with a condominium you’e also competing with owner occupants.

Areas (specific neighborhoods) are a big topic and it’s hard to summarize the entirety of a market in a short forum post. Obviously that’s something that a good real estate agent should absolutely know about and it seems like you have had some difficulties getting that information from your current agent.

There are several good agents who monitor Bigger Pockets regularly; I’m sure that some of them will chime in here, but if they don’t, let me know and I can certainly connect you with some good ones.

Depending on your time or how much you are in Rhode Island, you could also try to go to a local real estate meet up such as RIREIG to connect with other investors to talk about areas.

But if you’re just looking for a single property and you’re based out of New York, that might be kind of overkill, and you might just need to find a more experienced real estate agent (at least based on what you posted).

Christian Allen · Answer

I think your intentions are in the right place but I'd give a little bit of caution about purchasing a property just to save a few thousand dollars on rent. From my experience, RISD and Brown students tend to want to live on the East Side, downtown, or Federal Hill. Usually in that order. I'm sure @Christopher Moss is very aware of the areas of student housing that give the best return but the general Washington Park area of Providence is too broad. For example, Providence's 9th homicide of the year occurred in that neighborhood just yesterday morning. Not the place you would want your son to live while at college.

If you are interested in investing in Providence long term I think it would be best to buy something that wont create more headaches than benefits. Most of the houses in Providence are 100+ years old and do require attention to keep in good condition.If you plan to manage from NY I would suggest getting professional management unless you confident your son would be able to handle the management alongside his studies. The areas I stated above have a solid housing stock but have become very competitive on price. Consider your exit strategy as well. Everyone has been talking about a downturn for the last few years and RI tends to get hit hard during down economies. When your son graduates you may be left with a long distance rental which has dropped in price and you'll have to continue to hold before selling.

Providence is a great city to invest in. If you have any questions on specifics feel free to PM me. I own a few multis in the city as well as live here.

Vic Lopez · Answer

@Anthony Thompson

Thank you for the quick reply and the info. I'm reading as much as I can to educate myself on the Providence market. The agent is new but he seemed willing to learn and lookup what he did not know which I find valuable in any profession but I will take you up on the offer if another agent I spoke to doesn't work out. In the mean time getting adequate living arrangements is my number one objective, so if you know of inexpensive and temporary student rooms send them my way.

Thanks again!

Providence, RI Student Rentals. Know anyone selling a condo?

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