Joseph Luca, president of the Rhode Island Association of Realtors, recently spoke to the Providence Business News about the upward trend for sales and appreciation in the multifamily category. In May, the median price for the sale of buildings with two or more units rose 20 percent. And the inventory rose as well, by 16 percent.
PBN: What is happening with the multifamily market? In one month, we had a 20 percent surge it seems in price.
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LUCA: I wouldn’t classify it as a surge. It’s been pretty consistent over the past year that prices have been increasing. There has been steady demand. A lot of times if you have a house and it’s listed at $200,000, and a lot of people are interested, and it ends up selling for $210,000, the appraisers, they have the offers to support that it’s worth that much. That value is supported by what’s going on in the marketplace. We’re moving the distressed properties from the marketplace. Right now, the average cost of a multifamily is $246,000.
PBN: Are the rents a factor? Are the prices escalating because rents are going up in these units?
LUCA: There is definitely a correlation there. I don’t know if it’s causal. If you can buy a property in Woonsocket … if you have a three-unit property there, with three bedrooms per unit, you’re going to get $1,500 a month for each three-bedroom unit. These are nice, fully remodeled units. That’s $4,500 a month. You can support a lot of debt service with $4,500 a month.
PBN: Who are these buyers, are they individuals, companies?
LUCA: Sometimes they are [individuals]. I had a conversation with a buyer last night. He had been wanting to buy a multifamily house. Smart guy, has been looking for properties, and finding good value. Multifamily was his first choice. But the prices are high. And he thought, you know what, maybe I should just buy a single-family. The single individual, not an investor, this was going to be a homeowner-occupied multifamily.
PBN: Where are the hot cities for this? Suburban cities, such as Cranston or Warwick?
LUCA: Suburban cities, [such as] Cranston, Warwick, they have their opportunities. But you can get really good values in cities [such as] Providence, West Warwick, Central Falls. Central Falls is really hot. There are folks who … from an investor perspective, if I’m going to buy an investment property in Central Falls, I should probably buy a second one, so when I send my snowplow guy around, he doesn’t have to go 25 minutes between each property. That’s part of it.
PBN: I’m curious. Given the uncertainty over the Pawtucket Red Sox, has that had a depressing effect on sales in Pawtucket? Or is the opposite true?
LUCA: It’s so competitive out there, for folks to find a house, they’re not even looking at that.
Mary MacDonald is a staff writer for the PBN. Contact her at macdonald@pbn.com.
