All Forum Posts by: Brian J Allen

Definitely still deals out there in the Worcester market.  Things are heating up, but sellers are willing to have conversations with well qualified buyers.  

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.

Congratulations, there are lots of opportunities like this in Worcester!

I believe there may be opportunities in Worcester for seller financing, the issue you have is you have to find a place that appraises for more than the owner is wiling to take for the property. there are certain areas where this is possible, but most of these houses will be in rough shape, you will need to be able to fix them up once you get them, and some will have fixes that cost money. So there are issues all around. i agree you should look into FHA loans and you may be able to find a house where you can have the closing costs wrapped into the loan. The key is working with someone who knows the market and knows which owners may be willing to work with you. This is a good time to try this strategy.

Glad to help in Worcester but i dont do lunenburg

https://www.wbjournal.com/article/work-to-start-on-31-unit-chandler-st-development?utm_source=Newsletter&utm_medium=email&utm_content=Coronavirus+sinks+Central+Mass++stocks+%7C+31-unit+project+to+begin&utm_campaign=Daily+3-9-20

This project is right in that area. There are 2 Buildings side by side being redeveloped on Chandler and Piedmont

Worcester has a big Buzz regarding the new Ballpark for the Woo Sox (Red Sox AAA club) also people are getting priced out of Boston.  This is driving prices.  Sadly many people are not aware of what they are buying.  Piedmont is very convenient it Runs from Main Street through Chandler st and ends at Pleasant street.  These are all major bus routes.  It is also FLAT unlike most multi neighborhoods.  However, if you work in Marlboro it would be hard to get through downtown Worcester to get out to the highway.

LOCATION is the key in Worcester and probably everywhere, the probability of getting your rent on time, and having respectful tenants is greatly influenced by traffic and neighborhood density.  $350k may have come and gone, but if you are ready to go, you may be able to get something.  This may require a lot of work on behalf of your agent and your bank, unless you are CASH, if that is the case you can probably get something that hits your requirements.

That is a big range.  Try to find someone local to each market you want to look in. eg.  I do Worcester, but I would hire a realtor in Hartford that works specifically with Multi family investors.  Same with Providence.  I am only 35 min to Providence but the market is entirely different and all real estate is local.  There is a lot going on behind the scenes in these markets so you need to have someone local to each market to find you what you are looking for.

if you are investing in Worcester you need to keep in mind that these buildings are 100 years old. it is rare that you find one that is completely done, and right now a done 3 decker is over $500k, people are bidding over $200k for SF homes that need $50k in work, it is really hard to compete as an FHA buyer, your best opportunity might be to buy from a flipper who is almost done, get it under contract then have a completed house by the time you close. They will work with you because you can shorten the time between completion and sale. This is what you should be looking out for.