Apartments as a rental investment in Providence

[Shashank Reddy]

Hi, I am planning on buying a rental property near by Providence place. However it's hard to finalize the deal as the rental property monthly payment including might some around 2.5k so not sure Providence has that potential to pull this Rental. And, does the apartment value appreciate in value over the years? Is Providence good place to invest in?

[Anthony Thompson]

@Shashank Reddy yes Providence is a fine place to invest. Like anywhere, there are good and bad neighborhoods and you have to do your analysis, but I've made good money in Providence over the years (and lost on a few deals along the way - no fault of Providence, just learning 😀)

It wasn't clear whether you were saying your mortgage payment is going to be $2500 and you wanted to make sure the rents could support that (if so, does it include tax and insurance escrows?), or you were asking if you can get $2500 in rents.

It depends on the number of units/beds and how updated they are, but yes you should be able to pull in $2500 in rents easily enough if it's in a decent area and the units aren't awful 1BRs.

As with any investment, you just need to do good rent comps and a workup/analysis of the property to see if the numbers make sense. In particular I'd encourage you to learn how to calculate the "debt service coverage ratio" (DSCR or sometimes DSR) as it will give you a good idea of how much breathing room you have with income from the property to pay the mortgage; ideally you'd like it to be 1.25 or at a minimum 1.2.

On appreciation, I think in general Providence is fine and will appreciate, but I also think this phase of the market might not have a lot of appreciation left at the moment so I wouldn't "assume" appreciation unless your holding period is 5+ years.

Usually I think the lion's share of appreciation in a run-up tends to go to the Boston area, but this time around I think Providence/RI is getting a little more of that due to some folks in Mass coming down to live in RI because work-from-home allows them to live cheaper in RI but still commute easily once or twice a week or for special meetings, if they have to.