All Forum Posts by: Fan Bi

@David Sisson You've provided a ton of value via BP on all things architectural, zoning, ordinances, etc so I'm hoping I can repay it slightly. 

Only that in my honest opinion, what you're asking for on the realtor side doesn't really exist. I've spent a couple of dozen hours networking for this unicorn buy-side agent (finds great value deals, will work on entry-level properties) and I don't think she/ he exists. The demand for these types of deals is so high that the agent will either buy it for themselves or refer it to someone in their very close network. I'm hoping others prove me wrong here!

On the banking side, I think it's much easier. Both BankNewport and Freedom National are portfolio lenders so don't need to conform to the federal agencies, i.e. their underwriting standards are not as strict. We know there are specific properties that we own that are on a conventional 30-year mortgage that wouldn't qualify for a Freddie/ Fannie mortgage. Happy to make introductions to either or both lenders. 

Has anyone had a good experience with a 1031 exchange qualified intermediary in Rhode Island? 

@Tom Bos I can only speak to Smith Hill but it's not an area that I'm excited to be a landlord, in fact, we're looking to exit our positions there. We modeled a 7.5% vacancy rate and a 10% maintenance fee (both off gross rents) but our economic occupancy has been much worse and it's closer to 15% vacancy expense and 15% maintenance fee. You add in capex reserves, property management, and PITI and there just isn't much margin. There might be a 10-year play given the proximity of Smith Hill to downtown Providence, but it's a very speculative bet.

@Anthony Thompson You're still favorable on the West End? We own some stuff between Westminster and Cranston St and have struggled with stabilization due to the tenant profile. I'm cautiously optimistic the gentrification of Federal Hill will bleed down but that's probably still 10 years away, if at all.  

@Dedric Polite Unfortunately I think Providence is just as over-heated as Boston is relative to it's potential. In the C-D neighborhoods there are some good deals on paper but the economic vacancy, in our experience, has been a real challenge. In the A-B neighborhoods, you'll probably see a slightly higher cap rate than Boston but lower long-term growth potential. 

@Oliver Hellested Congrats on the progress!

From everything we're seeing, it's still a seller's market. How are you evaluating your opportunities - minimum cash-on-cash, cap rate, etc? We entered the market a similar time to you and have seen opportunities shrink up even in the short period. 

There seem to be different posts in various threads about renting by the room to students. Are any local investors willing to share their experiences, what the rent roll looks like, and what parts of town they're in?

@Stephen Douglas Congrats on the progress. From your byline, it sounds like you're living in Woonsocket but any other factors driving you to focus on the area?

Has anyone had good experiences investing in C-Class Neighborhoods?

To put some context around it, these are $60,000 a door multifamily units in Providence, RI, where a B-Class would go for $100,000 and A-Class $150,000. The C-Class unit rents for $900 a month with tenants paying utilities, and for these prices the demand is pretty good so physical occupancy isn't too much of an issue. On paper, this is a good deal. You hit a 1.5% rent rule, and cap rate of 10%+.

BUT, economic occupancy and its related costs are a killer. Most tenants in our C-Class units are either directly or close to living month-to-month which directly impacts their ability to pay. Cash flow stops, legal fees get involved, constable fees and varying degrees of tenant turnover later, on a $900 a month unit, your whole year's margin is gone. 

1. Outside of the tenant screening basics like credit score, no evictions, references and 3x salary to rent, do people who own C-Class properties have other things they've learned?

2. Once a tenant becomes late, how quickly do you push to go to court (expense), vs giving them a month to get current? 

A few more seasoned investors have told me, perhaps controversially, that most cities place such onerous zoning restrictions and are completely inactive in aiding affordable house because lower income and lower-mid income residents are such a net loss to the cities, i.e. little tax revenue and big consumers of city services. If this is true, it's likely the supply of affordable housing in Providence, Warwick, Pawtucket, West Warwick, Central Falls, North Providence, South Providence, etc will remain extremely tight. A good thing for investors. 

Now this is a big macro assumption, but you'd have to believe the underlying growth factors of Boston to be pretty strong for the foreseeable future, and companies will continue to open campuses outside the city, e.g. Dell EMC in Franklin. It's not too much of a stretch to think this will increase the demand for housing just south of the border.

Would love any thoughts from armchair pundits!

We just completed two refis in Providence but the appraisal didn't come back at the target and I'd love to hear any stories from local investors who've followed a BRRRR strategy.

Hollis St -  Realtor.com $207,000,  Zillow at $274,000,  Trulia at $261,000, appraised for $230,000. It's fully occupied four-unit that rents for $3,675, so even at $270,000, it still satisfies a 1.4% gross yield. 

Harrison St -  Realtor.com $198,000,  Zillow at $262,000,  Trulia at $200,000, appraised for $200,000. Also, fully occupied four-unit that rents for $3,200, so even at $240,000, it still satisfies a 1.3% gross yield. 

The worst part was both appraisers used comps from over a year ago, and in a hot market that makes a big difference, and I'm confident they were anchored on the purchase price  (both acquired ~15 months ago) even though we invested in upgrades. 

Would love any thoughts or stories.