Buy and Hold in Providence RI or Worcester, MA

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Buy and Hold in Providence RI or Worcester, MA

Tarcizio GoncalvesPro Member
Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes

Hi everyone,

I am pre-approved to buy my first investment property. My wife and I are looking for either a 3 or 4 multi family unit. Because we are having a hard time finding a deal near Boston (where we live) we are looking outside of our area to find deals. We have narrowed down our search areas to either Worcester, MA or Providence RI. Both locations are within 1 hour drive from us. We are even contemplating moving to the area where we invest since it’s not that far and the possibility to house hack is good.

What we know from both locations (Please correct us if we are wrong):
We shouldn't count on appreciation
Good chance to cash flow in both places
For the most part, the school system isn’t that great (at least that is what I found through my research)
According to the 2014 census, Both cities had a population growth (Worcester grew more)
The rental market seems to be better in Providence than in Worcester
Propety taxes in RI are higher than Worcester

I was wondering if I could get some advice from the community to help me narrow down where to invest. I’ve been on BiggerPockets for 4 months now gaining knowledge and I am ready to take the jump.

Thank you all in advance for the help and advice. 

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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
9y

@Tarcizio Goncalves I'm not that familiar with Worcester, other than the occasional drive-in for a Black Diamond REI meeting. In general it has seemed like a bit of a depressed area, but it's not really my back yard. I'd be curious what the trend has been in that area for the past 5-10 years and if there's anything promising on the horizon.

Providence has a wide range of areas, and as @Patrick Wheeler mentioned there's the East Side which is a good area with college students. It's hard to find a "deal" there because everyone knows it's a good area, but it's much easier to manage tenants there and it's more or less guaranteed to stay an "A" area in general.

I think my biggest concern with Providence, as you mentioned, is the property taxes. Providence has a different tax rate for non-owner-occupied properties, and it seems like whenever they have any budget holes, the first place they look to take money from is landlords. It had gotten so bad at one point that a group formed to fight the excessive landlord tax, with some mild success - see the Providence Apartment Association.

Personally I am very concerned that various cities and towns have made financial promises they really can't keep (pensions, infrastructure, etc.), and when push comes to shove, they will choose to raise taxes instead of renege on promises or institute needed reform. And when that happens, they will look to non-owner-occupied properties since the owners probably can't vote against such increases - an idea Providence already has implemented and I expect others will as well.

So if you have your choice of properties/areas and you intend to be there for a while, I always encourage folks to research the financial stability and ability to meet future projected obligations of any given city/town. Some good sources for researching that question are agencies that rate municipal bonds.

Also it might not hurt to ask your accountant or financial advisor what your personal (income) tax burden would be if you lived in Massachusetts or Rhode Island. It might not be much difference, but it's worth asking just to know ahead of time, especially if you're in touch with her/him now due to tax season anyway.

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  • Patrick Wheeler
    Real Estate Agent · Boston, MA · Member since 2015 · 319 posts · 80 votes
    9y

    @Tarcizio Goncalves I feel like both markets are pretty similar as you mentioned. I spent some time looking into the Worcester market a while back and I went to college in Providence so I have some experience with both markets. In my opinion, mostly do to the tenant base, I would choose Providence if you stick with the east side area. You can target a good amount of Brown/RISD undergrad/graduate students, which is nice. Also, especially if you decide to move to either area, I like more surrounding areas of Providence (Newport, Bristol, Narragansett) than Worcester.

    Lastly, there's over 700 more 3-families in Providence so that can only help!

    Good luck in your search.

    1Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Tarcizio Goncalves I'm not that familiar with Worcester, other than the occasional drive-in for a Black Diamond REI meeting. In general it has seemed like a bit of a depressed area, but it's not really my back yard. I'd be curious what the trend has been in that area for the past 5-10 years and if there's anything promising on the horizon.

    Providence has a wide range of areas, and as @Patrick Wheeler mentioned there's the East Side which is a good area with college students. It's hard to find a "deal" there because everyone knows it's a good area, but it's much easier to manage tenants there and it's more or less guaranteed to stay an "A" area in general.

    I think my biggest concern with Providence, as you mentioned, is the property taxes. Providence has a different tax rate for non-owner-occupied properties, and it seems like whenever they have any budget holes, the first place they look to take money from is landlords. It had gotten so bad at one point that a group formed to fight the excessive landlord tax, with some mild success - see the Providence Apartment Association.

    Personally I am very concerned that various cities and towns have made financial promises they really can't keep (pensions, infrastructure, etc.), and when push comes to shove, they will choose to raise taxes instead of renege on promises or institute needed reform. And when that happens, they will look to non-owner-occupied properties since the owners probably can't vote against such increases - an idea Providence already has implemented and I expect others will as well.

    So if you have your choice of properties/areas and you intend to be there for a while, I always encourage folks to research the financial stability and ability to meet future projected obligations of any given city/town. Some good sources for researching that question are agencies that rate municipal bonds.

    Also it might not hurt to ask your accountant or financial advisor what your personal (income) tax burden would be if you lived in Massachusetts or Rhode Island. It might not be much difference, but it's worth asking just to know ahead of time, especially if you're in touch with her/him now due to tax season anyway.

    4Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    9y

    Thank you @Patrick Wheeler. Dumb question: east side of Providence, are you referring to East Providence? 

    0Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    9y

    @Anthony Thompson thank you so much for all your help. This is great advices. 

    0Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Tarcizio Goncalves No, they're entirely separate (East Side of Providence vs. East Providence).

    One thing to keep in mind if you're going to set up MLS searches via riliving.com is that "East Side of Providence" is such a separate market compared to the rest of Providence that it has its own city/location entry apart from "Providence" in general.

    (If you're going through a real estate agent, he/she probably already knows that - at least I hope so! :)

    2Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    9y

    @Anthony Thompson thank you very much

    0Reply
  • Mary Shawcross
    Warwick , RI · Member since 2014 · 7 posts · 5 votes
    9y

    Also on MLS some properties that are located on the East Side of Providence sometimes get entered under Providence by the listing agent. Most of the East Side is zip code 02906 with a small section being 02904 (which is also North Providence).

    2Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    9y

    @Mary Shawcross Thank you so much

    0Reply
  • Lucy Bettencourt
    Real Estate Agent · Lincoln, RI · Member since 2015 · 6 posts · 0 votes
    9y

    Tarcizio

    I'm in the group, also a Realtor in RI, and lived in Providence for twelve years before moving to Lincoln (for the school system! Good place to buy if you relocate).  Let me know if you're looking for help from a Realtor.

    0Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    9y

    thank you @Lucy Bettencourt

    0Reply
  • Fan Bi
    Investor · Boston, MA · Member since 2016 · 91 posts · 45 votes
    8y

    @Tarcizio Goncalves Did you ever decide between Providence and Worcester? My wife and I were in a very similar position, i.e. priced out of Boston and we decided on Providence. We continued renting in Boston but were buying multis in Providence. I completely agree with @Anthony Thompson that it's very hard to find deals on the Eastside. For comparison, we bought a two-family on the Eastside for $235,000 that has a rent roll of $2,500. Around a similar time, we bought a four-family in The Armory neighborhood for $175,000 (and put $10,000 into it) and it's rent roll is $3,100. 

    3Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    8y

    Hi @Fan Bi.  We bought a really nice 2 family in Cranston and now we are a Rhode Islander. We moved in early September and since then, I've been exploring the area and searching for my next investment. In the last 3 months, I've put 7 offers on properties and got outbid on all of them. A couple weeks ago I started looking at commercial properties (strictly apartments) since the competition is much less. Haven't found a property that the numbers work yet. I would love to chat and and bounce off ideas since we are both new to the area. Are you planning on ever making the move to RI?

    0Reply
  • Fan Bi
    Investor · Boston, MA · Member since 2016 · 91 posts · 45 votes
    8y

    @Tarcizio Goncalves Congrats! I don't have plans on moving into RI, but will look to continue to invest. When you say you're looking at commercial apartments, how many units are you looking at, and where are you finding them? 

    I hear you about the lack of inventory and the prices. We've been on the sidelines for a few months because prices are just so aggressive.

    0Reply
  • Daina Estime
    Boston, MA · Member since 2018 · 4 posts · 1 vote
    8y
    This is all really great info! I’m currently in the same boat, but I’m doing this solo. It’s hard not really knowing the layout of Providence as well as I know Boston, but it seems like a really good place to start.
    1Reply
  • Account Closed
    Riverdale, MD · Member since 2016 · 18 posts · 12 votes
    8y

    Thought I would throw my two cents in. Currently located in Washington, DC, but considering a move to Providence or Worcester to House Hack and slowly grow a rental portfolio.

    I went to college in Worcester and lived in Providence for a number of years thereafter. I will say that Worcester has gone through significant revitalization in the last 5-10 years. It's population will likely be over 200,000 this coming census for the first time in 70 years. New apartment complexes are being built, especially in downtown. I also love Worcester. It's a gritty, industrial city with a diverse amounts of industries and a strong rental market with a ton of students.

    That all said, Leaning towards Worcester, but still open to Providence.

    1Reply
  • Tarcizio GoncalvesPro Member
    OP
    Rental Property Investor · Palm Beach County, FL · Member since 2016 · 150 posts · 40 votes
    8y

    @Daina Estime, PM me if you ever want to know more about the area. I can share my knowledge of what I found so far in these 4 months that ive been living here. @Account Closed, thanks for the valuable info. I was on the fence for a while between Worcester and RI but ultimately opted for RI. My wife and I fell in love with Cranston. 

    2Reply
  • Gabriel L.
    Investor · Providence & Philadelphia · Member since 2020 · 34 posts · 19 votes
    5y

    @Account Closed, just curious where you ended up between Worcester and Providence. My wife and I are interested in house hacking a multi-family and we are looking at both places. 

    0Reply
  • Brian J Allen
    Real Estate Agent · Worcester, MA · Member since 2018 · 517 posts · 409 votes
    5y

    The key to Worcester is the neighborhoods.  Many are very livable with parks and access to the North and West with places to hike or go skiing.  Providence has better jobs for higher earners, but Worcester has tons of $50k jobs which always make tenants for life.  People stay in their neighborhoods and live there.  There are also neighborhoods with mixes of multis and SF homes.  Also, the colleges are spread out and places like Clark and WPI are integrated into multi family neighborhoods not gated off from them.  Always willing to discuss Worcester with anyone anytime.

    2Reply
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