The Real Estate Investing Authority®

Signs The Real Estate Market Might Be Improving In Rhode Island

IS THE RHODE ISLAND HOUSING MARKET SHOWING SIGNS OF IMPROVEMENT?

The days where most buyers were priced out of real estate investment may be coming to an end soon enough. In the last couple years real estate prices skyrocketed and sellers were getting up to 100K over asking price forcing so many hungry investors, like you, to the sidelines…but the first signs of the landscape changing are upon us. It’s time to awake from the slumber and start thinking about the possibility of real estate investment once again. 

 

QUICK DIVE INTO THE ECONOMICS 

Let’s make sure the macro of this story makes sense so you can see where you fit in:  

Housing prices skyrocketed because demand was super high and supply was very low. To offset that, demand either has to decrease or supply has to increase.  Increasing supply when it comes to housing is very difficult and impossible to do on a short timetable while demand is much more malleable. So…the Federal Reserve increases interest rates, making it more costly to borrow money and therefore more difficult to afford a mortgage. Simultaneously, to decrease their own risk, lenders ask for larger down payments (25-30% is typical currently for non owner occupied properties) on said mortgages making it that much harder for people to afford to buy at these inflated prices…so… prices naturally need to come down.   

That’s the basic outline of the cycle we’re in, but so obviously absent is a timeline. Like all markets, the “when” is the huge question mark and those who can best anticipate the “when” are the investors who beat out the rest. 
 

LEARN MORE: UNDERSTAND WHY YOUR TAX ASSESSMENT IS GOING TO SKYROCKET 

 

THE “WHEN” ALWAYS STARTS WITH A SIGNAL 

When thinking about whether or not a rental property is a good investment it makes sense to think in terms of price per unit. With this current inflated market, $100,000 per door has become commonplace (more later on the affordability of that), which is why demand is slowing. That’s just not affordable unless you jack rent prices way up and that in itself can become problematic as it too operates on a demand curve that decreases your options and increases the likelihood of vacancies. At 100K, the barrier to entry is just too steep for most. 

That being said, Nexus Property Management’s Vice President, Greg Rice, scours listings throughout our territories as part of our Nvest® buyer’s agency services, where Nexus finds properties to match our clients’ purchasing ability and comfort levels. Just this week, in Woonsocket, RI, there was a 4 unit mixed use apartment listed at $239,000. If you’re doing the math in your head already, that’s $60,000 per unit…a far cry from the 100K we’ve become used to. Upon visiting the building, Greg was shocked to find that it a) was fully occupied, b) the commercial space was newly renovated, c) the landscaping was in great condition, and d) the property was well painted and the roof was in great condition. In other words, there was no underlying reason this property should be priced so low other than a change in market conditions. 

Does this mean you can now expect $50-60K/door to be the norm now? Of course not. But changes always begin somewhere and this could either be an outlier or a signal that change is upon us. 
 

LEARN MORE: HOW REMOTE WORK IS IMPACTING YOUR BOTTOM LINE AS A PROPERTY OWNER 

 

YOUR NEXT STEPS 

This may be anecdotal but it’s not irrelevant. It doesn’t tell us exactly when we can expect prices to drop back into the affordable range but we have a better understanding of its proximity than we did a week ago. The natural next step is to return to that investment mindset. Perhaps it means looking at your finances and moving things around so you’re ready when the time comes. This should trigger some excitement and checking your listings periodically should be brought back into your routine. As Greg puts it, we’re at the top of the roller coaster and that click-click-click-click as we’re dragged up to the top of that first peak has ended. We’ve crested and who knows if the next section will be quick and smooth or will curve back up a little, but the ride has begun…and our money is on this being the beginning of normalization and attractive times for investors. This is a strong, early sign that the market is becoming healthier. 

 

LEARN MORE: JOURNEY THROUGH THE PROFITS OF A TYPICAL NEXUS CLIENT 
 

A COUPLE WORDS ABOUT INTEREST RATES 

Yes, interest rates are twice as high as they were before Covid, but this shouldn’t weigh on you too much. Don’t let that daunting 6% (or whatever it is now) take you out of the game. No matter what your expenses are, it all comes back to your spending breakdown. Paying higher interest is just another function of your monthly expense and you can move other costs around (“cut some of that pie up differently”). Instead of fixating on that interest rate (that is likely temporary when you compare it to the life of your mortgage), remember the benefits that will come from acquiring this asset: 

  • Mortgage/tax deductions 

  • Building equity 

  • Concrete holding for retirement or children’s future 

  • Monthly cash flow (even if not right away) 

You might have to do a little work yourself but if you’re anchored in a process that works for you, or you hire a professional property manager to assist you along the way, putting that money toward real estate instead of your checking account or your floundering 401K is well worth it. 
 

 

CONCLUSION 

We’re seeing the very first signs that the market might be taking that much anticipated turn that investors have been waiting for. This doesn’t mean go out and buy, buy, buy, but it does mean you should dust off your investment playbook and change your mindset (omitting your emotions) after a couple years without any wind in the sails. 

Want to learn more, or have additional questions about anything pertaining to rental property and/or real estate investment? We encourage you to reach out to our team.  
 

WHAT OTHER PEOPLE ARE READING: 

  1. HOW REMOTE WORK IS IMPACTING YOUR BOTTOM LINE AS A LANDLORD 

  1. DOES IT MAKE SENSE TO KEEP RENTS BELOW MARKET PRICES? 

  1. GET READY FOR YOUR TAX ASSESSMENTS TO SKYROCKET 

 

CHECK US OUT ON SUBSTACK: 

https://realestateislife.substack.com 

 

Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.

 

Your Property, MANAGED®

The Real Estate Investing Authority®

Connecting You To Better Living®

 

You Could Own A Nexus Property Management® Office For Less Than You Think!

Property Management Franchise Opportunity

Fall River MA Property Management Office

Worcester MA Property Management Office

Pawtucket RI Property Management Office

Natick MA Property Management Office

Add new comment

Nexus Feedback

I had multiple issues that needed to be addressed and John was super polite, professional,accommodating and informative....his work was excellent each time that he came out... I hope If I ever need more work that john is the one to do it.....I highly recommended him and his work speaks for itself...thanks again

20 Sep 2018

I reported a major issue in my apartment on 8/31, and the very next day a technician came to my unit (on Acushnet Ave in New Bedford) to repair the issue. (I honestly don't recall the technician's name, I wish I could, last 4 digits of his number were 7726) The technician was kind and very professional and fixed the problem within a couple of hours. Nexus in general is always extremely responsive to my tenant needs and the realtor who arranged my lease was helpful and kind. All in all a great company and I love renting from them, I sincerely hope to continue to do so when it becomes time to move into a bigger unit.

11 Sep 2020

I have had great experiences with Nexus and their leasing process. My vacancies have been managed exceptionally well - from getting apartments rent ready, to placing new tenants. Mikalai, Ken & the entire team work fast and do a great job. Thanks!

01 Oct 2020