All Forum Posts by: Fan Bi

@Eric Pierpont Super helpful feedback. Most of our portfolio is in C-D class neighborhoods in Providence, RI and Syracuse, NY and we almost exclusively work with subsidized housing to avoid collections issues. We're underwriting a 21 unit package in the highlighted red area in L/A aiming to apply the same approach. Would that be a bad take? 

We randomly have a 3,100 sf lot zoned R-3 in South Providence. Looking around on MLS, seems like it should go for ~$40,000.

What should we do with it - sell it ourselves, sell it via a broker, something else more creative?

cc @Anthony Thompson @Frank Patalano

@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.  

@Tracy Viola @Filipe Pereira @Alex Hiller

What kind of numbers are you seeing in Western Mass in working class/ low-income multis? 

We invest mostly in greater Providence and it's typically $80k for a turnkey unit for $950 a month in rent. Fortunately/ unfortunately very different to even 3 years ago where it was $50k a unit for $875 a month in rent.

Has anyone successfully used any tactics for conventional loans to reduce their invested amount with Rhode Island banks? e.g. 

- using a larger closing credit but the bank still took 75% of the gross purchase total
- bank allowed a seller 2nd lien

@Frank Patalano @Anthony Thompson @Bruno C.

@Christopher Lynch My $0.02, I've gotten burned a couple of times on D-class properties for the exact reason @Anthony Thompson stated. On paper, you get 12%+ cap rates, so at 75% LTV, 20%+ CoC - amazing!

And this is on the entry cap. You say, there's no way a 2-bed unit in South Providence should be rented for $550. It should be at least $800. And if we increase the rents to market, you get even more incredible numbers. This is so easy!

You tell the tenant you're going to improve the unit and increase rents. That's when it all unravels and why local communities hate investors and gentrification has negative connotations. There's no economic mobility for the tenant - they can't afford to pay market and there are no new units available at $550. So now you've got a squatter. 6 months later- legal costs, unpaid rent, constable, moving costs, storage costs, trashed unit ... it's just a really bad outcome for everyone. Now you're into the unit for a $18,000 turnover instead of a $6,000 turnover, which means payback period for the increased rent balloons to 3+ years ... assuming your next tenant pays on time.

@Anthony Thompson It's so tough because these prices and '9th inning' sentiment has been around for at least two years, maybe three.

Rents at 25% below current market seems like a really great standard, but as you said makes growing the portfolio almost impossible. The worst part, I think there's a reasonable case for a continued run-up for another 12+ months caused by inflationary pressure (also accept there's a deflationary case) and macro trend of public investors moving to private markets.

So you take a 6-8% cap investment with medium-term volatility over ... <1% CD product or lunacy of public equities.

Curious what folks are seeing in July 2020?

- Prices are same as pre-COVID - which why shouldn't they be, people are paying rents and rates are low. 
- Limited supply is keeping prices elevated and why would you sell if you're getting 6-8% cap rates.
- Concerned CARES unemployment stimulus expiring on July 31 (but surely they'll pass something additional until the election).

Should investors accept paying these retail prices, where is the opportunity?

Related, has anyone used RISE engineering/ National Grid or RI LeadSafe subsidies/ rebates? Are there other rehab/ improvement incentives locally? 

Has anyone used or know of any local projects taking advantage of tax credits or low-interest loans?

cc @Anthony Thompson @Frank Patalano @Brandon Ingegneri