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Updated over 2 years ago, 05/07/2022
Does Providence (or any place back east) have rental opps?
Hey folks, I'm originally from the Boston area and spent many a summers in Westerly, RI, so I'm familiar with Providence to a degree. I keep seeing it, as well as Worcester, pop up on sites as a top cash flowing city. Is that just a bunch of malarkey or are there actually opportunities back east? I feel like up until now I have been directed towards the Midwest or down South, and been told to steer clear away from back home. Cheers!
Hi @Lucas Bernard I am a firm believer that there are opportunities just about everywhere, including Providence. That said, the cash flow is OK but at this stage of the market I'm not blown away. I did a 1031 exchange late last year and was seeing cap rates around 4.5% for on-market (MLS) B area properties in Providence and adjacent towns. Cap rates may be even lower now, though of course everyone is waiting to see what the effect of rising interest rates will be.
@Lucas Bernard - There are opportunities everywhere. I'm a big proponent of investing in your own back yard if it makes sense. As an investor, you get a certain level of control and oversight investing locally compared to out of state. You also learn how to manage your units if you decide to self manage, which I'm a fan of in the beginning. It allows you to become accustomed to the day to day responsibilities of a property manager. How do you expect to do a good job asset managing your properties if you don't fully understand what goes into being a good vs. bad landlord?
In addition, house hacking and finding a way to reduce your living expense locally is always ideal. Your living expenses are your largest line item and if you can reduce them dramatically, you can deploy those savings into more cash flowing assets. To that point, Providence and Worcester are great for those strategies. Both places have a large multitude of 3-4 families. No matter the market, most of the time, 3-4 families will let you live for free or close to free. That is personally why I really like these markets.
- Andrew Freed
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- Podcast Guest on Show #69
Quote from @Anthony Thompson:
Hi @Lucas Bernard I am a firm believer that there are opportunities just about everywhere, including Providence. That said, the cash flow is OK but at this stage of the market I'm not blown away. I did a 1031 exchange late last year and was seeing cap rates around 4.5% for on-market (MLS) B area properties in Providence and adjacent towns. Cap rates may be even lower now, though of course everyone is waiting to see what the effect of rising interest rates will be.
Hey thanks for the info Anthony! I'll start doing some digging of my own and see what I can find. Compared to what I have seen, I will say that cap rate is pretty low, even for this market. I am new to this though, and could be taking that out of context.
Quote from @Andrew Freed:
@Lucas Bernard - There are opportunities everywhere. I'm a big proponent of investing in your own back yard if it makes sense. As an investor, you get a certain level of control and oversight investing locally compared to out of state. You also learn how to manage your units if you decide to self manage, which I'm a fan of in the beginning. It allows you to become accustomed to the day to day responsibilities of a property manager. How do you expect to do a good job asset managing your properties if you don't fully understand what goes into being a good vs. bad landlord?
In addition, house hacking and finding a way to reduce your living expense locally is always ideal. Your living expenses are your largest line item and if you can reduce them dramatically, you can deploy those savings into more cash flowing assets. To that point, Providence and Worcester are great for those strategies. Both places have a large multitude of 3-4 families. No matter the market, most of the time, 3-4 families will let you live for free or close to free. That is personally why I really like these markets.
That was a really concise and helpful response, thanks Andrew! Househacking a multifamily is my preferred starting point once I move back east, for the exact reasons you pointed out. Would love to connect and hear more, I used to go to Worcester all the time to visit my friends at Holy Cross! :)
just a general rule of thumb, when in doubt just ask a local realtor
There are rental opportunities in every market. Although the market in Rhode Island is extremely competitive right now. We just went to an open house this weekend with a client of ours. 87 Showings in 1 day!
Low inventory and tons of demand is causing bidding wars throughout the state. Just make sure you run your numbers and make sure you are getting a good cash on cash return if you are going to move forward in this type of market. Interest rate increases and high prices are squeezing the market. It is becoming harder and harder to find deals that make financial sense.
For higher cash flow many investors are expanding their search into places like Westerly, West Warwick, Coventry and Woonsocket.
@Lucas Bernard - If you are only looking at MLS properties you are going to see a much lower cap rate. However, they can still be cash flowing properties.
Best bet, is really to try and find them off-market, or go for the bigger properties that cannot typically be financed through conventional owner occupied financing. There is still lots of competitiveness for sure. I haven't really seen CAP rates above 4% for MF Rentals since COVID, with on market properties.