Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
Hello Providence!
So I am looking to buy my first property (ideally sooner than later) ... My timeline could be 3-6 months if I went conventional, or much sooner if I went FHA through Rhode Island Housing. I have a few questions and wanted to also just open the floor to meet other investors and real estate professionals in this market!
My plan is to house hack my first property, and eventually move into BRRRRs a few years down the line. I'm looking at multifamilys with 6 or more bedrooms (or potential for additional bedrooms) in the East Side neighborhood 02906. Obviously, this is a very desirable - and pricey - area as there is little on the market. I'm wondering if people have any insight on finding deals in this area. Do a lot of people already drive for dollars here? My second choice neighborhood is Elmhurst, and would be perfectly content in this neighborhood, though I've heard recently zoning laws have changed for the R-2 zone to restrict 3+ unrelated people from living in one unit.
Any insight on financing in RI, different neighborhoods, just a hello from fellow Rhode Islanders, and any advice with the market the way it is as it relates to buy and hold house hacking in a B+ to A market.
Realtor · Providence, RI · Member since 2016 · 32 posts · 26 votes
6y
Hi @Jake Noreau, as @Anthony Thompson mentioned you can get more for your money in Elmhurst (a lot more). I have a 2 family in elmhurst that pulls great rents (1200 for a 2BR with no utils included) and I didn’t have to pay the big price tag associated with the East Side. It might be worth prospecting for rent by owner listings in the areas you’re looking in to make your efforts more efficient. As for financing I recommend talking to local lenders who understand the R.I. nuances. I can recommend a few if you’re shopping for a mortgage. Feel free to message me if you have any specific questions.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
to A markets. Also just anything (or anyone!) to look out for in this area. Excited to get started, and hoping to get out of analysis paralysis sooner than later.
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jake Noreau welcome to Bigger Pockets! Yes, there are several of us here in RI who will be happy to help you out.
You've definitely picked one of the most desirable areas to target for your first investment. In general, and this isn't specific to the East Side, you'll do better if you approach owners directly and "make your own deal" rather than just looking at what's listed on the market.
But as one of the most sought-after markets, the East Side has a lot of people pursuing off-market deals as well. You can drive for dollars there, but there are few properties that are visibly distressed and they have likely been targeted by other investors in the area.
My thought is, if you're also OK in Elmurst, you'll get more bang for your buck (income for money spent) than on the East Side.
As far as general advice with the market the way it is... well, we're in a bit of a time of transition at the moment. My advice - and others may differ here - would be to wait and see over the next 3 months and then depending on where the market is, either buy then or (if things still look bad), hold for another 3 months and re-evaluate (then rinse and repeat until things look stabilized).
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
Yes @Jake Noreau in Rhode Island I recommend the RI real estate investors group that meets monthly on the third Thursday of each month. In southern Mass I recommend Black Diamond REI which meets monthly alternating between Worcester and Burlington.
Both groups are education and networking oriented, which means they don't try to sell you stuff.
However in this time of social distancing you definitely want to check the websites and Facebook pages of any group you're interested in, to make sure they're still meeting. For example I know Black Diamond canceled their most recent meeting and the RI group canceled their last meeting (which would have been last week) and next meeting.
(Obviously if the Coronavirus pandemic drags out longer here, then meetings will continue to be canceled as the groups deem necessary for everyone's safety.)
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Anthony Thompson Yeah, I have heard about the Black Diamond Group when I listened to an early BP podcast with Ann Bellamy talking about hard money lending. I'll have to check those out. The social distancing has seemingly put my plans on pause unfortunately. My realtor is (with good reason) advising me to wait as viewing is of course trickier right now. I heard a few opinions that now may actually be a better time than normal to pick up a buy and hold deal just because so many buyers are afraid to get out there, but the logistics of doing so as a first time buyer seem to be a major roadblock.
Realtor · Providence, RI · Member since 2016 · 32 posts · 26 votes
6y
Hi @Jake Noreau, as @Anthony Thompson mentioned you can get more for your money in Elmhurst (a lot more). I have a 2 family in elmhurst that pulls great rents (1200 for a 2BR with no utils included) and I didn’t have to pay the big price tag associated with the East Side. It might be worth prospecting for rent by owner listings in the areas you’re looking in to make your efforts more efficient. As for financing I recommend talking to local lenders who understand the R.I. nuances. I can recommend a few if you’re shopping for a mortgage. Feel free to message me if you have any specific questions.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Brett Read Thanks for the tips! My concerns with Elmhurst have been the potential quality of tenants (still mostly students I assume), my preconceived notion that rents were lower over there, as well as specific zoning laws. My current realtor has mentioned multiple times to me that the R-2 zone no longer allows more than 2-3 unrelated people in one unit (depending if they're students), but I'm not sure how accurate this is, or how much it is enforced.
I'm definitely shopping for a mortgage. I've considered more conventional routes to lower my monthly (and overall) payment, but after reading Craig Curelop's House Hacking book, it seems like an FHA (especially with the 7500 first down) might make more sense just to get cash flowing and then refinance later. My realtor is trying to steer me away from FHA as well as Elmhurst, which makes me wonder about trying to find someone else. He's very intelligent, but I think I'd prefer to work with someone who is an investor themself. Any suggestions on financing would be appreciated.
Another area to consider if you are targeting college students is East Providence. With low volume and rental prices going up on the East Side, more and more students are ending up over the bridge in East Providence since it's only a short distance away. I don't know, however, what their zoning laws are. You'd have to check into that.
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Amanda Davidson I've always liked East Providence as an area fewer people talk about and pursue, compared to Providence or Pawtucket.
I don't think it has nearly as much student population as Providence does around the colleges, so if someone specifically wants to rent to students I don't know that I'd target EP, but it has a lot of solid bread-and-butter neighborhoods and I think generally speaking is good value for the money especially with multis.
Jake, if driving for dollars is a strategy that appeals to you, I think you'd get more leads per mile in East Providence than the East Side of Providence.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Amanda Davidson Absolutely, that was actually the first place I was looking. I used to rent there myself in college after I decided that the east side was too expensive. The reason I'm sticking with Providence for now is because I'm really leaning towards the $7,500 down FHA deal through Rhode Island housing, and because I feel like tenants are easier to find. My rent was cheaper in East Providence, but do you find that to be a trend?
@Jake Noreau East Providence is included in the RI Housing program. And yes, rents are going to be cheaper than the East Side, but so is the purchase price of the homes.
Realtor · Providence, RI · Member since 2016 · 32 posts · 26 votes
6y
@Jake Noreau I can only speak from my experience but I think there are a lot of non student renters in Elmhurst depending on where you buy. I didn’t get a single student inquiry when I had my listings up. If you buy near the Pembroke and Eaton St area you’ll probably get a lot more student renters compared other areas of Elmhurst. It’s a diverse neighborhood. Most of my inquiries were from folks that work at the Roger Williams Hospital or young professionals who work downtown. Send me a DM and I’ll connect you with the lenders I use.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Amanda Davidson oh I know you can get 7500 towards most neighborhoods, but it's only forgivable (over 5 years of owner occupancy) if you purchase in Providence or Woonsocket. Still, EP is on my radar for the future.
I'd be curious to know about how the rates compare with the two different 7500 down programs. I know it's a slightly higher rate for the down payment assistance, but now I wonder whether the forgivable version is an even higher rate.
Investor · Hartford, CT · Member since 2019 · 9 posts · 8 votes
6y
@Jake Noreau Hi Jake! Congrats on taking the first steps in your real estate journey! You mention the $7,500 DP assistance programs through RI Housing. From prior experience the program has changed a few times on forgiveness, time-in as owner occupied, and other guidelines. Certainly be sure to have a knowledgeable originator explain the nuances.
I personally don't like having "restrictions" for a small amount of money. As real estate investors I think we are working to achieve getting away from restrictions in general. RI Housing has its own guidelines on the house qualifying besides that of the government insured requirements. In the initial steps I noticed that the loan originators with RI Housing were hard to get a hold of and response time was inefficient. When you want to close on a house you want to work with someone that will always respond timely and that will clear through hurdles should you encounter them along the way.
There are even sellers in a multiple offer scenario, possibly at the advice of their agents, that will go with an offer without RI Housing than that of RI Housing because of all the steps involved. I hope this helps, but as I mentioned check with your originator(s) on this. Thanks!
Investor · Hartford, CT · Member since 2019 · 9 posts · 8 votes
6y
@Jake Noreau One more thing to add. If you are ever going to sell the house and it is went through RI Housing, you will need to get the clear not only from the lender, but from RI Housing too!
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jake Noreau yes @Angel Dominguez is right, RI housing is known to be difficult to work with. If I had a buyer with RI housing and one without, I would choose the one without every day of the week.
On the general idea of restrictions for a small amount of money, I agree wholeheartedly. Nothing is truly free. Read the fine print on anything where it seems you're getting something for nothing.
Years ago I investigated "free" money being offered for lead paint abatement work, and buried many pages into the agreement was a paragraph saying that rents would be kept at least 30% below "fair market rent" for the units for five years, or something to that effect.
When I reached that paragraph I stopped reading, it wasn't worth it to continue.
Sometimes it's worth the trade-off or restrictions. It probably is in many cases. But read carefully and understand exactly what you're giving up to get the money.
If you don't understand it, then as Angel said, have a knowledgeable mortgage originator explain it to you. Most of the time though, I find the language is pretty accessible, it's just that the documents are lengthy and it takes time to go through them, time that most people prefer not to spend.
I urge you to buck that trend and sit down and actually plow through the documents. It will let you go forward with eyes fully open, and will be a great education to boot.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Angel Dominguez Thank you for the information! You are definitely backing up what I keep hearing a lot of people saying. Definitely working towards not having to go through them, but the financing is a big plus for now. Good advice to sit and talk in depth about the specifics of the restrictions.
@Anthony Thompson More good advice, thanks! That lead paint thing is a wild story, I'm trying to be careful to read line by line and question EVERYTHING. Definitely need to go through all the fees associated with that DP assistance, I agree its likely not completely free.
**UPDATE** So I had an offer stick, and just got into P+S as of yesterday, so it seems like I am on my way! Fingers crossed this works out and is as worth it as I'm hoping it to be. Inspection is scheduled for Monday - Any thoughts on that? Referrals or opinions on getting radon, pest, and mold inspections? I like the idea of peace of mind, and potentially using the results in negotiations, but want to hear some of your thoughts?
Investor · Hartford, CT · Member since 2019 · 9 posts · 8 votes
6y
@Jake Noreau Congratulations on finding what I hope is a good deal! If you are working with an agent he/she or the affiliated brokerage should have a list of independent vendors for you to pick from. Write a list of questions or concerns you have so you can discuss with your agent. I would also recommend you read on the mentioned testing so you can make a decision on whether it is even warranted based on the location and characteristics of the property. Otherwise your lender can provide additional guidance too.
Keep in mind that given the current state of things lenders, title companies, and others may play a factor on time to close. Try and see what the current price trend is, if it is a multi-family what the tenant makeup of the property is (occupations/payment ability). The seller(s) may now have greater incentive to sell than before. Good luck, continue your due diligence, and keep us updated!
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Jake Noreau congratulations on getting something under contract!
I think you should get all the inspections you can afford as inspections are relatively cheap insurance against expensive problems, especially for your first property.
But if you're strapped for cash I would rank them as pest being the most important, unless you have any reason at all to think there might be a mold issue in which case I think you should do that one and the pest inspection if you can do both.
Radon is a take it or leave it for me, I usually get it done but maybe there are arguments not to. I tried to find some good web pages on this but everything I found seemed to say you should test. This EPA Debunks 10 Myths About Radon page was a better page on the topic. But I'd say if you personally are going to live in the home, I'd definitely lean toward doing it.
If you see no indication of moisture issues or anything else that makes you think mold is an issue, then I'd say this is optional. I don't usually do it unless I think there's some kind of issue. Often a regular home inspector knows to keep an eye out for this and can alert you to mold or likely presence of mold, and then you can get an inspection/test for that specifically as a follow up.
Normally I would say you should absolutely be present for the inspections, both to ask questions and for your own personal real estate education. However in this environment you may wish to not be present and instead talk to the inspector on the phone before and after the inspection.
I think it would be too logistically challenging to ask the inspector to Facetime you while doing the inspection, but you could ask them, if that really appeals to you.
Be prepared that some or even all of the tenants may not let the inspector into their units.
In that case, if I were you I'd probably guesstimate at least 10K repairs per unit and discount the price accordingly. If the seller doesn't like it, too bad - they can convince the tenants to let your inspector in. If they can't, then IMO that's their problem. For you to buy sight unseen (or using pictures that are who-knows-how-old) is a risk on your part and you should get compensated accordingly (with a lower price).
Also remember that at the bottom of every MLS listing sheet will be a disclaimer to the effect of, "information is deemed reliable but is not guaranteed and buyers must conduct their own due diligence". That means, if the MLS say 3 bedrooms and you later find out the third bedroom was more like a closet and not a bona fide third bedroom, that's on you for not doing due diligence to find out what you were buying.
So even if the pictures are nice, there's no guarantee of how recent or accurate those pictures are, nor that there hasn't (or won't be) a change since they were taken. Also a lot of pictures these days are taken with a wide angle lens which makes rooms look comically bigger than they really are, so keep that in mind.
If you're getting the sense that I'm urging you to be cautious, that's because I'm urging you to be cautious. This is a time of flux for the market and the economy. I believe there are fewer buyers out there and if you're one of them, you should ask for and demand more, and above all be careful. Round down on your anticipated income (seriously: discount current rents by 10% - really) and round up on your anticipated rehab, especially if you can't inspect something.
Rental Property Investor · Providence, RI · Member since 2020 · 18 posts · 6 votes
6y
@Fan Bi Absolutely, no problem! So negotiations have been proceeding according to plan, I got the inspection done within three days of signing the purchase and sales agreement. Following social distancing guidelines has influenced both the initial viewing, and inspection (which ended up doubling as a viewing of another floor). In general, agents are trying to limit the amount of time in a property, as are inspectors (though the guys at HomePros were still extremely thorough with me!). Gloves, masks, as you'd expect. I've been very proactive on communicating with my agent and lender, so haven't had too much trouble there, but I know some things could have been handled faster given face to face meetings. I am going through an FHA loan partnered with Rhode Island Housing, so I expected it to take a while, but i got news yesterday that the appraisal was just performed, just waiting on the report. Not sure exactly HOW that was performed, whether drive-by or in person... I hope to find out. I think some of my lending has been pushed through speedily, just because I've been quick on getting what they need, and they know my mother from one of the local law offices. Hopefully I will have more updates/be in the property within a couple more weeks *fingers crossed*.
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Fan Bi I'm going through a closing right now. In general, everything is taking a lot longer. It took over two weeks to schedule the appraisal and then again, over two weeks to get it back. It was ridiculous. And that was just one small part of the process.
The appraiser couldn't get into any of the apartments and I thought that was going to kill the deal, but amazingly the bank was OK with it. The appraiser did go into the basement and common areas of course.
A lot of the local banks and credit unions are buried with EIDL and other CARES act funding right now. My lender called it an "all hands on deck" situation.
Also if you wanted the seller to do or complete any repairs before closing, it's going to be hard to get contractors out to do those so you might have to settle on a credit instead (which can be better if you can get the work done cheaper - though then you have to manage it of course, instead of just having it be done).
Closings aren't happening face to face any more; many are "document closings", where the parties come in at different times and sign things separately. In some ways that's better, it cuts down on last-minute issues a bit. But scheduling can still be tough.
I guess I would just say, plan on things taking a lot longer. And be careful about buying things sight-unseen. If I had a property with a problem, I would absolutely be putting it on the market now hoping that people would be lax in their inspections, because some will be. Obviously that's a very small minority of properties, but just be careful.
Rental Property Investor · Providence RI · Member since 2018 · 5 posts · 20 votes
6y
@Jake Noreau Sorry I’m late to the thread, congrats on moving toward closing on a house hack! I’m currently house hacking on the East Side of Providence, we moved in just before the pandemic hit. I actually sold my single family in Cranston, downsized a bit, but did it to set us up for the future. Very happy with our decision and love the area.