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Rhode Island Real Estate Investing 101



03/07/07
By Kurtis Parisi

When I began investing in real estate in 1995, prices were low. You could buy a two family in Cranston for about 80K. Rents were lower too. An average 3 bed in Cranston rented for about $600 per month. Times have definitely changed. However the basic principles I used back in 1995 still apply today and if you’re diligent you can find real estate deals that will allow you to own rental property and not loose your shirt.

Below are some simple steps to buying your first investment property in Rhode Island and using those investments to realize financial freedom.

Know your market

First, focus on one or two geographical areas or towns i.e. Cranston and Warwick. Get familiar with the average rents, prices for homes and taxes. One of the best ways to do this is to find a real estate agent that owns rental property. Many real estate agents can send you a daily listing of properties located in your chosen area. Drive by as many as possible. The goal is to get general feel for the market so when a good deal pops up, it will stick out like a sore thumb.

Calculate Positive Cash Flow

Once you’ve developed an overall feel for your specific market (two families in Cranston), begin to dive into the numbers. Your goal is to be conservative. You want to look for properties that will generate positive cash flow (money left over after paying you mortgage, taxes, insurance and operating expenses).

Income – (PITI + Operating Expenses) = Positive Cash Flow

Sometimes the seller may have under-estimated the income or the expenses. Use your real estate agent as a resource to help you verify the income and expenses. Use the Pro Jo to see what other multi-families in Cranston charging for rent.

Good deals are very hard to come by so you’ll have to look at a lot of investment properties and analyze a lot of deals. However, if you’re patient, you’ll find a property that generates a modest cash flow.

Watch Out for the “Paralysis of Analysis”

Investing in real estate can be emotional. I can remember having a pit in my stomach when finally signing my first purchase and sales agreement. Fear of the unknown is natural and actually a good thing. It helps us re-examine our decision to make sure it’s the right one. Sometimes, this fear can cause you to over-analyze and stall which can cause you to miss out on a great money making opportunity.

You can make money buying investment properties in any market. Remember know your market; calculate your positive cash flow, and then make a decision. Don’t let fear keep you from realizing your dreams.

John Boudreau is a full time real estate investor and partner at Ion Marketing Group.

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