New investor from Rhode Island

Investor · RI · Member since 2014 · 45 posts · 7 votes

Hello everyone,

I am a newcomer to the world of real estate investing and am hoping this site can assist me in making educated decisions. I am looking to purchase a 2-3 family in Providence or Kent county and it has been quite difficult thus far. I do not have the deep pockets of an investor but do have general contracting knowledge so will most likely be looking at a fixer-upper. If someone has some advice for multi-family investing in the area of Rhode Island that would be wonderful. I'm still in my early twenties and just graduated college with a job right out the door thankfully. My reasons for investing are first of all my family and the fact that retirement in this economy is grim at best. I want a solid financial plan for our future, anyone with advice/tips please chime in.

Thanks

Timothy

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Tim G.
OP
Investor · RI · Member since 2014 · 45 posts · 7 votes
12y
Thanks again for the help and welcoming everyone has given. After some careful thought I'm shifting my sights on to SFH's at this point as there is an abundance of them and the exit strategy for a newcomer like me is much easier in the long run. I like the economy of scale factor with MF's but I think to start with an SFH and a good amount of equity makes sense. I can you this to my advantage later on to purchase more properties and be in a better position without the headaches of a MF. I have also had terrible luck with finding anything that can even cash flow $100 in my area of RI. Any comments are appreciated.
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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
12y
Tim, if the #s work out to your comfort then I think SFs are a great way to get started in landlording.

The tenants are usually a little easier to work with, which gives you a better chance to establish your systems.

So, use it as an opportunity to develop those systems! (marketing, showing, application screening, pre-move-in inspection, maintenance request log, etc.)
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Tim G.
OP
Investor · RI · Member since 2014 · 45 posts · 7 votes
12y
Anthony,

I totally agree and did not even consider that aspect of SFH rentals. There are plenty of great houses on the market the only barrier now will be to decide If I should try to get in any of the great short sale properties I have seen or stick with regular sale. The short sale properties I have found were (in my eyes) wonderful investment properties as they would provide a much more significant return than any multi family i came across (2-3 family). Running numbers I can calculate around a $200-300 profit per month for each property that meets the criteria (and there are many). What is your opinion on short sales and especially in the case of someone in my position?

Thank You
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
12y
Welcome to the site tim.

As for your question on short sales. They are a pain.
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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
12y
@James Wise is right, short sales are definitely a pain. They can take a long time - so much that the market will have moved by the time it's over. 6-12 months is not unusual at all.

The good news is, if you change your mind, you'll almost certainly be able to walk away because the bank will have exceeded the timelines in the contract. But the bad news is months and months of aggravation and "we're just waiting for the bank to get back to us, I've left voice mails and sent faxes".

I've had some success stepping in where other short sales have fallen out of contract because the buyer got tired of waiting. As long as you step into the original buyer's shoes and don't change anything, it might go a little faster.

But there's no recipe for finding those. All I can say is, if you identify a property you really like, but it's marked as Pending or "Active Pending Short Sale Approval" (code "AS" on the MLS), then every month or two send an email or call the listing agent just to reiterate your interest in case the buyer backs out.
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Tim G.
OP
Investor · RI · Member since 2014 · 45 posts · 7 votes
12y
@Anthony Thompson I came across a short sale that this same scenario applied. Property was in pending and the buyer backed out and moved on. I picked up on it as it is a SFH in a decent neighborhood of west Warwick (northern part near the golf courses). The property is assessed at around 140k and the offer put in is 92k (they were asking 95k) with 2500 in closing costs. We have been approved for a conventional loan with 3% down with mortgage insurance dropping off in 5 years so will bring my totally monthly down to $750-800 a month. renting it out in a few years we should have even more equity and be able to cash flow about $400-500 a month. Any advice/tips on this deal?
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Gregory Rice
Investor · Pawtucket, RI · Member since 2014 · 45 posts · 15 votes
12y
Hi Tim,

My name is Gregory J. Rice and I am the Leasing Director at Nexus Property Management. We are a full circle realty investment, leasing, maintenance, and management company located in Pawtucket, Rhode Island. We don't do sales; strictly rentals. We currently service hundreds of residential and commercial units in Northern Rhode Island and Southeastern Massachusetts. We are licensed to purchase real estate in RI & MA. As of today we have a vacancy rate of less than 1% (.045 to be exact). We offer all of our tenants and owners their own online portal to take care of all issues. Tenants can pay their rent online, file maintenance requests, view their lease related documents, and also chat with our staff live 24/7. The owner portal allows owners to approve/deny work orders, make owner contributions, chat with our staff live 24/7, and also view tenant related documentation. We consider our service to be the most efficient, fluid operation in New England; possibly the entire country.

I suggest you watch our video on what a property manager can provide for you:

Can I Benefit From A Property Manager?

I also recommend you take a look at our "NVest" page for further details on our services:

Nexus Property Management NVest Program

Thank you kindly,
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Mark Russo
Providence, RI · Member since 2014 · 10 posts · 3 votes
12y
Tim,

What monthly rent amount are you basing your scenario on? If you can provide the address of the West Warwick SF property, I can take a look and give you a market rent for the house.

We also have to think about maintenance costs of the house - they will increase for an older property. Will you have time to do the repairs/upkeep yourself?

Your financing offer looks good, but if you can get something similar for an owner occupied two-family, that may work even better for you.
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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
12y
Originally posted by @Tim Gilman:
@Anthony Thompson ...The property is assessed at around 140k and the offer put in is 92k (they were asking 95k) with 2500 in closing costs. We have been approved for a conventional loan with 3% down with mortgage insurance dropping off in 5 years so will bring my totally monthly down to $750-800 a month. renting it out in a few years we should have even more equity and be able to cash flow about $400-500 a month. Any advice/tips on this deal?

Tim, sorry I missed this. Based on the financing you described, it sounds like it's going to be owner occupied (by you) for the first few years, so I don't have a good framework to evaluate that as an investment since it's not, really, at least until you move out and rent it.

Until then it's more of a question of, does the monthly payment work with your personal financial situation?

I agree with @Mark Russo that when it comes time to rent it, you'll want to do a market survey to see what rents are. If you want to get an idea, you can do a market survey now, but I certainly wouldn't assume rents will rise between now and whenever you start renting it out.

Also, was your offer accepted?
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Mike HurneyPro Member
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
12y
@Gregory Rice That's impressive.

What's the Market vacancy rate for Southeastern MA and Northern RI?
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Gregory Rice
Investor · Pawtucket, RI · Member since 2014 · 45 posts · 15 votes
12y
@Mike Hurney We have found that the average vacancy rate for this area is in the ballpark of 14%-21%.
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Mike HurneyPro Member
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
12y
@Gregory Rice Now I'm impressed!
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Tim G.
OP
Investor · RI · Member since 2014 · 45 posts · 7 votes
12y
Originally posted by @Anthony Thompson:

Originally posted by @Tim Gilman:
@Anthony Thompson ...The property is assessed at around 140k and the offer put in is 92k (they were asking 95k) with 2500 in closing costs. We have been approved for a conventional loan with 3% down with mortgage insurance dropping off in 5 years so will bring my totally monthly down to $750-800 a month. renting it out in a few years we should have even more equity and be able to cash flow about $400-500 a month. Any advice/tips on this deal?

Tim, sorry I missed this. Based on the financing you described, it sounds like it's going to be owner occupied (by you) for the first few years, so I don't have a good framework to evaluate that as an investment since it's not, really, at least until you move out and rent it.

Until then it's more of a question of, does the monthly payment work with your personal financial situation?

I agree with @Mark Russo that when it comes time to rent it, you'll want to do a market survey to see what rents are. If you want to get an idea, you can do a market survey now, but I certainly wouldn't assume rents will rise between now and whenever you start renting it out.

Also, was your offer accepted?

The payments absolutely would work as our mortgage with insurance, taxes, and any other hidden costs I could possibly find comes out to around $800/month. We would walk in with $30K+ of equity at the time of moving in as well which would provide that exit strategy for the future. The neighborhood is very active with around 2+ houses being sold in the past couple of months for much more money. The offer has been accepted for 10K less then asking price with $2500 of closing costs. Rent o meter gives an average of $1300-$1400 for similar properties in the area. Doing some investigating on my own has shown asking rents are even higher than that (around $1500/month) for the area. Calculating everything out it should be fairly easy to yield a $400+/month profit when we rent it out in 1-2 years. I'm very conservative so i have estimated everything on the high side compared to the averages told to me by the town, sewer, and utility companies. Ive calculated everything many times and the property seems to make perfect financial sense for what our goals are.

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