Investor · Providence & Philadelphia · Member since 2020 · 34 posts · 19 votes
My wife and I are looking to make our first REI deal in the next 3 months. We're looking at small multi-family (2-4 units) properties in Providence, RI (ideally East Side or Federal Hill area) that we can house hack. We initially wanted to BRRRR, but we are wondering if contractor availability during COVID (given everyone seems to be renovating these days) will be a large impediment or not?
Also, this post is about BRRRR, but we'll take any advice on people looking at small multi-families in the time of COVID.
@Gabriel L. I don’t think contractor availability has really been affected by COVID, but much more just from their being in so much demand from folks doing renovations and home improvements.
I think BRRR and house hacking are both still very good strategies, but yes you should account for some contractor delays and a bit higher costs just because contractors are in such demand right now.
I’d also recommend that if you haven’t done rehabs before you only take on a small-medium rehab project, not a large one (60K+) and that you add a 10% extra buffer to your estimated project cost for safety to account for first time learning opportunities 😊
@Gabriel L. I don’t think contractor availability has really been affected by COVID, but much more just from their being in so much demand from folks doing renovations and home improvements.
I think BRRR and house hacking are both still very good strategies, but yes you should account for some contractor delays and a bit higher costs just because contractors are in such demand right now.
I’d also recommend that if you haven’t done rehabs before you only take on a small-medium rehab project, not a large one (60K+) and that you add a 10% extra buffer to your estimated project cost for safety to account for first time learning opportunities 😊
Hi @Anthony Thompson, thanks for your reply, it's really helpful. We definitely would want to focus on small-medium projects, but we're having a hard time creating a realistic budget/timeline for the Rhode Island market since we don't have a baseline of "normal".
We've been following David Greene's journey, and reading/listening to how other people have BRRRRed in other markets. Do you have any advice on how to find models of BRRRR / rehab timelines and costs for Providence? For example, if we are looking at a three unit multi-family property (2 beds/1 bath each) where the kitchen and bathroom could use a refresh and bit of modernizing, do you have any suggestions on how to come up with a cost estimate and timeline during non-covid times? and then how would we tweak that model during covid times?
@Gabriel L. Curious why the move from NY to PVD, work, COVID-related, something else?
We're active in the market and other than delays, I don't think prices have really been affected by COVID. It's still a sellers' market and for East Side and Federal Hill, you'd be looking at $150-$200k a unit for PP and it's going to be very hard to cash-flow via a house hack. All to say, from a local real estate perspective, PVD and RI are still in ~ year 8 of an expansion.
@Gabriel L. your best bet would be to walk through the property with the contractor you'd have doing the work for you. As far as an adjustment for COVID, maybe +5% project cost, if any?
It's hard to say - again, I don't really feel that Covid has affected things so much as the real estate market being hot and contractors in demand. It's hard to quantify the cost from the project taking a little longer because your contractor is juggling several jobs at once, or it taking longer for some materials to come in.
For a house you could figure 10K for kitchen and 5K for bathroom (maybe on the high side), should be much less for an apartment. You could figure 20K to redo the entire unit again on the high side. But again, you're best asking the contract you'd probably be using.
@Fan Bi - We basically felt with the pandemic (and not being able to safely go out, eat out, etc) that this was the right time to move from renting to building equity. We are fortunate enough to be able to work remotely for the foreseeable future.
We initially considered everything from Hudson Valley area in NY to Texas to New England, and eventually landed on Providence or Worcester mostly because it was close to my wife's family. The numbers on paper for both cities looked decent (especially for our NYC salaries), and we're honestly leaning towards Providence for no other reason than to avoid any further delays in decision making. (Every city and strategy feels like it has potential and thus we are experiencing LOTS of analysis paralysis).
We definitely see the seller's market. It feels like every property is being snatched up. We felt house hacking in a multi-family might be a good way to go since it means we can live for "free" / take advantage of owner occupied mortgage rates (if not BRRRRing) etc. It does mean that we've been focused on annualized rates of return over cash flow/cash on cash return. Would be really curious what factors you look for when evaluating properties in MA/RI etc, where the market is more competitive and home prices are higher relative to rent.
@Gabriel L. what we are hearing recently is that cost of materials are up. Particularly wood and shipping may be slower. Appliances are on backorder sometimes.