Rhode Island multi family Market

10 Replies

Hey everyone, 

Im brand new, still searching for my first multifamily deal. My plan is to buy and hold and I am wondering what you guys think are good areas in Rhode Island for this strategy. I live in Massachusetts so I don't know RI to well but have recently started working along the MA/RI border.  

My thoughts are Cranston seems like a nice area and if I remember correctly had a positive pop. growth rate when I checked citydata.com. Other areas I've searched and have positive growth rates and relatively low crime on citydata.com are Warwick, West Warwick, Cumberland, and North Providence. I have looked a little bit in Pawtucket but I'm not to confident Pawtucket is a great place to be. I have searched in Providence but I do not know the neighborhoods at all yet, so the couple open houses I went to ended up being in what seemed like sketchy areas. One was on Ralph Street in Providence, what do you guys think of that neighborhood? It looks like it may be considered to be in the Silver Lake area.

Like I said I'm brand new so my insights may be way off but I'm curious to hear what everyone else thinks of the different RI areas.

@Sean Doherty Cranston is generally good, though the areas bordering on Providence can sometimes be not-great. Prices are higher of course, especially in Western Cranston which doesn't have as many rentals - my guess is the #s aren't generally going to work well for investments in Western Cranston.

Warwick is OK but has had a number of school closings over the past few years so I view it as a riskier investment. I grew up in Warwick but unfortunately the consensus I've started picking up is that it seems to be a step down from Cranston - though I'm sure plenty of people would disagree. Still a decent area though, and for investments it might be a good mix of area quality vs. investment return, especially as I don't get the sense a lot of people look in Warwick specifically.

Pawtucket has several not-great areas, and the problem is that "everyone" (or just about everyone, it seems to me) targets Pawtucket multi-family properties saying, "it's close to the T!". Yes it is, but when everyone uses the same rationale to pursue things in Pawtucket, it makes the prices shoot up. So I think Pawtucket is good for sheer # of rental properties (supply), but I would be careful with the #s just because the demand has caused prices to increase so much, and definitely drive by any potential Pawtucket property both day and night since there are some tough parts of Pawtucket.

Cumberland is great, again not a lot of rentals (like Western Cranston), you'll pay more but generally higher quality. As long as the #s work Cumberland is pretty good.

North Providence is the land of condos (LOL). Lots of rental supply there, generally the areas are a little tougher and definitely "rental quality" but for the most part not too bad, certainly not like South Providence or Olneyville toughness. More like B-C, whereas Cranston is a solid B trending to A in Western Cranston and with some C where it borders Providence. I haven't done a ton in Cumberland to comment on specific areas per se but generally I think of it as generally B with some A areas and a few C areas down where it borders Central Falls.

West Warwick is tougher, generally C, plenty of rentals and generally rental quality. Like Warwick, I don't know too many people who target WW specifically. If you don't mind working class, thoroughly C areas, I think West Warwick has a lot of promise. But it is farther away for someone who's investing from Massachusetts. Even if you hire a property manager, it's nice to be able to drive by occasionally to check up, and West Warwick would add at least a half hour each way compared to, say, Pawtucket or North Providence.

Hope this helps!

Hey,

Live in pawtucket, own 2 in pawtucket. Looking for a 3rd in pawtucket. Very biased but i like pawtucket because its right over the mass border 10 min to proivdnece 10 min to emerald square on  route one that has any shops you can think of. i also looked in cranston. houses are expensive in rhode island bought jan 2017 a 3 family in pawtucket for 175 at market value worth now 240 about. 

I dont believe there are as many great deals but cheaper than massachussetts and pawtucket i think can be better for young people who work in mass. We looked into providence warwick and cranston but have decided on another in pawtuxket

Thanks, @Anthony Thompson and @Sherwin Vargas very helpful info, exactly what I was looking for. Based on what you guys said I think I've got the right sense of those areas. It's nice to hear from others, it definitely makes me feel more confident moving forward.

Hi Sean,

I live in Cranston (and love it), but I have yet to find a multi-family that cash flows. Maybe there are off-market deals out there, but I haven't found anything on the MLS in Cranston that works (unless you are going to house hack). I'm not saying it doesn't exist, but you'll have to work pretty hard to beat everyone else to find it!

I'm not sure if you've spent time driving around different cities/towns down here, but so far, I have found that my gut reaction to an area is usually on point when I ask other investors about the neighborhood.  It's difficult to invest time into doing that if you're working, but it's worth the effort.  And RI is small...you can do it in a day :)

@Christopher Howard I live in MA and invest in RI. As far as taxes for an non-LLC it is really no different then MA except you earn it in RI , you pay it to RI. Yes RI state is a bit higher tax then MA. For an LLC you have that $500 business tax you pay each year. You also have a few costs like getting an address for service of process as an out of state landlord $50/year it costs me. You need to register with the state, but that is free , and with the town which cost depends on the town. For short term rentals everybody pays the 6 % extra tax,, but you pass it on to your tenants. Am I missing some extra tax for out of state people?

@Sean Doherty As a fellow out-of-state investor in RI, you just want to be really mindful of your edge. If you're @Anthony Thompson or @Brandon Ingegneri you have scale economics to do direct marketing and have proprietary access to local contractors. IMO, in mid-2018, most of the opportunity has been taken out, largely by fellow out-of-state investors. After some aggressive buying the last few years, we're sitting on the sidelines.

Just be careful. Like a lot of newbies who try to BRRRR/ value-add, the biggest mistake we've made is that even the deals that look favorable in excel end up costing WAY more in poor economic vacancy and tenant/ unit turnover. Thankfully for us, the market has been going up so we have some paper gains and done some refis but if the market went down and cash flows were being sucked up by repositioning properties, we'd be a world of hurt.