All Forum Posts by: Brian J Allen

What are your plans now? are you doing a rehab?  Renting? or selling?  Always curious about the long run.

Steve, That is probably the most important aspect of buying in Worcester, knowing the neighborhoods.  When my kids were at sports practices i would go for a 2 hour walk a couple times a week to go street by street to feel the neighborhoods.  Grab a dog and go for a walk and you will see where you want to buy. 

If we had just bought things in March of this year we would be way ahead.  Worcester is probably up 10% in the last 6 weeks as people are pulling $ out of the stock market to take advantage of the low interest rates and high worcester rents.

@Tyler lee as an economist i would think that there would be a decline in the prices of real estate in submarkets. Working in Worcester, MA doing multifamily residential and rehab/flip SF properties I would expect to see that decline, and perhaps see it in some dramatic fashion. However, that is definitely not the case. The Worcester, MA multifamily market, which had a momentary pause(about 4 weeks) when people were skittish and unable to show properties, has seen a dramatic uptick in both pricing and activity. We are still not back to the pre Covid times when there would be 8 Open houses on a Saturday with 50 groups attending and offers due on Monday. But offers on MLS listed properties are very strong, and often times are above what the properties will appraise for. There was one SF flip/rehab property that had 50 showings in 2 day, 20 offers over asking and of those at least 8 were all cash. Now how do we explain this? 1. There is a ton of pent up demand for multifamily housing, either from owner occupants or small investors who have been priced out of Boston. 2. CAP rates, Worcester still has CAP rates of 6-12 which you can't get elsewhere. 3. Flight to safety- people are pulling $ out of the Stock Market to put in Residential real estate 4. Real Estate is a great leveraged investment with low interest and the lurking "INFLATION" on the horizon. Personally I think that #4 is the leader, but there are a lot more reasons people are investing in Sub markets, 5. If i don't have to commute to Boston, what better time to live in a small City like Worcester with Great food and highway access to all of New England, 6. Low cost of entry for starting a business and access to talent from many great colleges. The list goes on.

What are your plans now?  will you live there or, rehab and sell?

i would love to meet up with some wholesalers in Worcester as well.

Investors are always asking the same question. Why is there such a wide range of CAP RATES for Multis in Worcester? Some Properties are selling for as much as a 12 CAP and others are listed at prices that are close to a 6 CAP. First of all, Worcester is a city of Neighborhoods and in Real Estate, the key is LOCATION X3. Depending on neighborhood your rents can vary greatly. WPI, Holy Cross, Shrewsbury Street, East Side, West Side, Green Island probably get you higher rents than other sections of the city and you will pay for that. Parking is also a HUGE determining factor for most tenants other than the College Rentals. Another big determining factor is condition of the property. Most Multis in Worcester were built from 1890-1930. If they have had periodic updates to the electrical, plumbing and heating systems, and they were taken care of, they have much higher values than if they did not. Knob and Tube wiring is prevalent in Worcester in a couple of the neighborhoods, but not so much in others. Some properties still have the original Slate Roofs which are costly to replace. The most difficult task related to placing a CAP rate on a property is you need the TRUE CAP RATE so you can compare apples to apples. The best way to do this is to use MARKET RENTS as the determining factor. Rents may be low for a number of reasons, but that does not change the TRUE value of the property. If the current rents are $1200 per floor and market rent is $1500 per floor, there will be some pain and suffering raising the rents, but LONG TERM the house has more value. The buyers in the Worcester Market are savvy. Pricing on 3 deckers are hovering around 100 X market monthly rents which is close to a 10 CAP. If the house has market rate tenants at $1500, $1500, $1500 and the property is in solid condition, it will sell for close to $450k, if it is in poor condition (needs a roof, siding, windows, has poor electrical, terrible bathrooms) there will be a discount say 90 X monthly rents $405k. If it is in Superior Condition it will go over that price (has new Roof, all new plumbing, all new electrical, super nice bathrooms) it may cost as much as 130 X Monthly rents $585k. The problem typically is that rents are not at market and they can be WAY off market. Sometimes there are tenants paying $900 in units that should rent for $1500, these present opportunities for buyers who are willing to take the risk they can turn over the tenants and get the rents to market. This does not mean that the house is worth $900 X 3 X 100 = $270k, but maybe you can get that same house for $400k. I hope this begins to answer the complex question on CAP RATES and values in Worcester. Feel Free to Chime in.

I agree with Philip.  Most of the stuff in Worcester is JUNK as it is all built prior to 1920.  You need a rehab budget so the 203k route works.  The key is finding something that is worth fixing.  Worcester is built on neighborhoods and the traffic patterns are quite complex.  You need to know the neighborhood you are investing in, not just the size or quality of the building.

you can buy a multi family in the Worcester area from $300-600k depending on what you want, there are also a lot of houses with in law situations, all depends what you are looking for,  but it takes a lot of searching

If you are interested in Buying in Worcester for the higher CAP rates and then renting in Boston, I am available to discuss those options with you.