Does House-Hack In Rhode Island ???

Question

Hi everyone,

My fiance and I are going to multiple open houses in RI, around the Pawtucket / Warwick area. We are 22 and currently renting. Does anyone have experience house hacking in RI and if so, is there anything we should look out for? Anything to be aware of? The RI grant of $17.5K is very helpful and is immediately forgiven which is great. Just wondering if someone may have experience in the Rhode Island market...

Thank you!!!

Jeremy Trier · Answer

Hi Brandon,

I live in Pawtucket and am currently house hacking.  It still can work, but it would be hard to find a deal that would enable you to live for free.  Not impossible though!

That grant is wonderful but it's sending more buyers in the market with very little inventory already.

Are you analyzing deals?  Do you have a budget?  Are you house hacking a SFR by the room or Multi-unit by apartment?

I would recommend finding a Real Estate Agent that is experienced working with Investors.  They can help you find what might work for you.  I know several if you'd like to PM me.  You can swing by my place and check it out too if you're in the area.  BTW Rhode Island has a Real Estate Investors group.  You can find us here -> https://rireig.com/

Best of luck!

Ryan Thomson · Answer

What?! 17.5k loan instantly forgiven. That's amazing. A couple pieces of advice:

- find a realtor who works with investors. If they have house hacked themselves or focus on that, even better. You are wasting your time looking at open houses if you don't know what to look for. You also really want a realtor in your corner to advocate for you and guide you through the process on the first one. The seller pays your realtor's bill so there is no cost to you there.

- Remember that real estate is a long term game and that with rising prices and rates the cashflow doesn't always look good. But if you look at the bigger picture of returns with loan paydown, appreciation, and tax advantages you will have a great return (and MUCH better than renting).

Anthony Thompson · Answer

@Brandon Durant congratulations on starting your real estate journey!

My best advice for potential house hackers is, run the numbers as if you weren't going to live there, and see if the property is still cash flow positive (and by how much).

Someday you may want to (or may plan to) move out and make it a purely investment property, and it's good to know in advance whether you will be able to do so and still have the property be cash flow positive.

Brandon Durant · Answer

I interned 2 years ago for the agent we are using. She also owns 2 properties as investments and is also looking for another property to househack. Great advice!

Steve K. · Answer

This grant sounds awesome, I hadn't heard about it before. I used a similar grant/tax credit (the first time homebuyers program that came out in 2008, which became an $8k grant in 2009). This made my down payment on my first property super low, enabled me to get into a property with very little down and was literally life-changing for me. That property transformed my life. So Do it!

My advice would be to buy the lowest value property in the highest value location you can get into aka the ugliest house on the best street you can afford. Then fix that property up to the median quality of the surrounding properties in order to force appreciation quickly/ capture equity. That's the name of the game in wealth building through real estate, it's all about location, location, location, and the bigger spread between your property and the surrounding properties you can get, the more equity you can gain/ wealth you can build. But be careful not to take on too much of a "fixer" for your first property: look for something with "good bones" that just needs cosmetic updating to increase the value and salability. Most retails buyers are looking for "cute" and "move-in ready", so buy the ugly one surrounded by the cute ones and make it a cute one. Definitely find a great Realtor who also invests to help you, and have a good inspector/lender/contractors help also. Find the Realtor first and they can set you up with the others. I lived in Newport and Providence briefly long ago, love that area of the country. Good luck!

Luan Oliveira · Answer

@Brandon Durant, have you considered a three family? It may make for a better house hack with two rents coming in! In the Pawtucket area you should be able to easily get $1,800 for a good quality updated unit. This would provide around $3,600 towards your expenses. Even though you won't be living for free, your out-of-pocket expenses will be a few hundred dollars! As others have said, also analyze it as a full rental, and in this case a 3, 3, 3, would gross about $5,400, notwithstanding any increases in the next 5 years. This puts you pretty close to the 1% rule around here, with prices hovering around 550 for a 3,3,3. While you won't have astronomical cash flow, the cash on cash return will still be pretty decent. Also, you can take the 1,000 to 1,500 you'll be saving in housing expenses for the next five years and use that to save towards another property! That should be at least 50K in the bank!

I've been house hacking in the area for a bit, and know others who have too. Let me know if you have any more questions!

Anthony Thompson · Answer

For folks in Rhode Island who are skeptical or want more information, it is in fact basically free money, a $17,500 grant:"applicants must be ﬁrst-time homebuyers purchasing a 1-4 family home or condominium in Rhode Island; meet income and credit score guidelines; and must live in the home as their primary residence. Homebuyers must also complete a RIHousing-approved Homebuyer Education class to prepare them for sustainable homeownership. The down payment assistance is a grant that does not need to be repaid... RIHousing is administering the program... Interested first-time homebuyers can find complete details and how to apply online at www.ristatewide-dpa.com"

(from Governor Announces Launch of Statewide Program to Help First-time Homebuyers - January 25, 2023)

Ian Halter · Answer

@Brandon Durant Pawtucket is a good strategy, especially if you're close to the East Side or East Providence, since you'll get better tenants and enjoy the lower tax rate. I've been seeing rental inventory at the top of the market increase, and I buy the story that there's little incentive for people to move and pay more rent when everything is already so expensive. Factoring low inventory of well-kept houses (a pessimistic view) - I would be more conservative in what you could charge for rent and increase what you expect repair expenditures to be

Brandon Durant · Answer

Hi Anthony,

That is a great idea, I've been running the numbers with the calculators here on Bigger Pockets. All are helpful and eye opening. We've been looking for a 2 family for about 2 months now and think an upcoming open house this week will hopefully be the one. I'll keep everyone here updated if possible.

Thank you for the help

Michael Diossa · Answer

To improve your chances of success, seek out a realtor who specializes in working with investors. Ideally, you should try to find someone who has experience with house hacking or who focuses on this strategy. Attending open houses without knowing what to look for is unlikely to be productive. A knowledgeable realtor can serve as your advocate and provide valuable guidance throughout the process of buying your first property. It's worth noting that the seller typically covers the cost of the realtor's services, so there is no expense for you in this regard.

When it comes to real estate, it's essential to think long-term. Keep in mind that rising prices and interest rates can make it challenging to generate positive cash flow in the short term. However, if you take a broader view of the potential returns, including loan paydown, appreciation, and tax advantages, you will likely enjoy a significant return on your investment. This return will almost certainly be superior to what you would experience through renting.

Does House-Hack In Rhode Island ???

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