Moving to Rhode Island:  A How To Guide for Families Buying Homes in the Ocean State.

 

Decision made: the family is moving to Rhode Island!

 

Now, time to narrow the search. Which towns? Which neighborhoods?

 

In last month's introduction, I made the case that prospective buyers should look at this through multiple lenses, including the potential return on the investment. For most, the purchase of a home is the most significant investment they'll ever make.

 

 

How reliably can we predict future appreciation?

 

We could ask the same question about any asset class: stocks, bonds, oil, etc. The naysayers will argue that appreciation is purely speculative. A roll of the dice. Cashflow, they'll say, is the only sure thing. And there's some truth to that, but shrewd investors know not to throw out the baby with the bathwater. Asset and wealth management is a multi-trillion dollar sector across the globe, and the wealthiest employ teams of fundamental analysts to do just this: carefully analyze available data to gain an edge on which investment opportunities hold the greatest upside for future returns.

Disclaimer: There's been a lot previously written on this topic. It ranges for the topical to overly technical. In what follows, I offer a more balanced take -- somewhere beyond conventional wisdom but short of standard deviations -- with a local context.

 

Indicator #1:Population Growth

One of the strongest drivers for appreciation is population growth. This one is pretty straightforward and noncontroversial: an increase in a market's population will increase demand and homes prices. Excluding towns with populations under 500 residents (sorry, Foster and Misquamicut), here are the towns with the highest growth rates over the last five years:

 

Kingston, RI: +6.03%

 

Cumberland, RI: +5.89%

 

South Kingston, RI: +5.23%

 

Providence, RI: +2.85%

 

Central Falls, RI: +2.53%

 

It's worth noting that as a state, Rhode Island's population has remained pretty steady overall, increasing 0.1% over the same time. The towns with the weakest growth were Woonsocket and Warwick, each declining in population by approximately 3%.

 

Indicator #2: Past Performance

Past performance doesn't always predict future success, but it's a good starting place. The following cities and towns have seen the biggest run up in median home price since 2000.

 

 

It's telling that 9 out of the 10 towns above are coastal, with the capital city being the lone exception (I guess you could make the argument for Providence). Of the waterfront-laden towns, there's a mix of tourist friendly spots (e.g. Block Island and Newport) and residential locations with well regarded public schools. Additionally, these are places where the median sale price for homes is already well above the state average, proving that that rates of highest growth aren't always with the up and coming locales.

 

Indicator #3: The Path of Progress

 

As Jay-Z once put it: “I could’ve bought a place in Dumbo before it was Dumbo / For like two million / That same building today is worth 25 million / Guess how I’m feeling? Dumbo.” If you invested in Dumbo, a then underutilized stretch of Brooklyn waterfront, you'd be a made man today. Last year, 85 Jay St. sold for $345 million to be used as a parking lot.

 

Enter Neil Bawa, real estate investing guru, who has developed a brilliant technique for modeling which areas in a town or city are likely to appreciate more rapidly than nearby neighborhoods. In a nut shell, he encourages investors to look for areas where median household incomes levels have risen ahead of home values.

 

It is my experience that home prices will always catch up to income levels.

 

Genius, right? And the data backs this up.

 

To visualize this, you can go here and search up your city or town of interest. To illustrate this concept, let's consider Providence's upper East Side. The first map (left) shows % change in median household income since 2000. The darker the gradient, the higher the growth. The second map (right) shows how median home values have changed in that same span of time.

 

The areas marked with $s are those where we would expect to see greater appreciation levels as home prices catch up to income levels over time. Obviously, there are many other factors to consider, but this framework will help direct our attention to areas with higher upside.

 

 

Local Investor Opinions

 

Which towns are likely to see above average rates of growth in value over the coming years?

 

I put took this question to a group of local buy and hold investors.

 

Several were bullish on waterfront communities that haven't yet seen the run up in appreciation of other similar town:

 

"In my opinion, I think you’ll see a great return in places like Island Park in Portsmouth, or anything with a water view in Tiverton. There are lots of older houses in these areas that people bought long ago, when there was plenty of waterfront property available." - Chris St. Peter, local investor

 

Another investor, Erika Twohig, offered this take: "I think we will continue to see a migration to RI from Boston and NY because of the water and “reduced” cost of living compared to the cities. Look at coastal towns, towns with main streets that are walkable, also semi rural towns with lots of land yet close enough to amenities."

 

Other picks included:

• Pawtucket, especially the along the 95 corridor
• Lincoln and Cumberland due to improving school rankings and location along 295.
• Cranston due to its track record of being pro-business and pro-growth
• The Elmwood, Olneyville and Silver Lake sections of Providence

 

If you're interested in my Top 5 Best Picks, reach out to me at tylercote@seybothteam.com.

Spoiler: Improving schools, proximity to water, and proximity to towns that have already seen large run ups in appreciation are the drivers I believe to be most predictive of appreciation.

 

Up Next: Schools

In our next post, we'll take a closer look at local school systems, one the most critical factor families must consider as they weigh potential landing spots.

 

Was this helpful? Way off base? Glaring omissions? Drop them in the comments section below.

 

Moving to Rhode Island: A How To Guide for Families Buying Homes in the Ocean State.

 

My first job out of college was teaching middle school Science on the northside of Houston. In Texas, it was impossible to drive anywhere without seeing bumper stickers pronouncing love for the state. Messages like “Don’t Mess with Texas” and “I wasn’t born in Texas, but got here as fast as I could.” And while Texas and Rhode Island don’t often get mentioned in the same sentence, this was proof that they share at least one thing: residents who think their state is second to none. Rhode Islanders are a proud people. And when you really think about it, what’s not to like? Miles of beautiful coastline. World class restaurants. Top ranked colleges. Del’s lemonade. And, not least of all, a capital city with more bars per capital than any other municipality in America. Those moving to Rhode Island have a lot to look forward to.

But let’s face it: The moving process can be daunting, even for seasoned travelers. These challenges are even greater when taking into account a move for a family. All at once, a move presents a long list of pressing questions that demand answers: What town or city do we move to? What are the neighborhoods like there? How are the schools? What about taxes? How do we time it with the sale of our current home?

 

As both a Rhode Island native who has moved five times in fourteen years and a realtor who has helped other families do the same, I write to share a few lessons learned. Each tip, offered here in Cliff Notes form, will be the subject of an upcoming post. 

 

Tip #1: Buy in neighborhoods likely to appreciate.

A home is the single most significant investment most people ever make. And yet, very little attention is paid to the likely return on that investment.

 

How crazy is that?

 

Consider this: the average age of a first time home buyer is 33. While there is no such thing as an “average home buyer” (everyone’s path towards homeownership is unique), let’s assume Joe, a prospective first-time home owner, is a young professional who contributes to a retirement savings account. It's unlikely that Joe's portfolio is made up a few hand-picked stocks, right? Too risky. So, Joe diversifies with a mix of mutual funds, each with built-in management fees. Or maybe he hires a financial advisor. Either way, it would seem reckless and unwise to chose these assets willy-nilly.

 

According to Zillow, the median house value in Rhode Island is right around $344,000 -- many times greater than the value of Joe’s retirement account. The town or city he buys in will impact the possible return on that investment. While ROI won't be the sole driver in his decision-making process -- at least for his primary residence -- smart home buyers must take this into account when considering a move. 

So, which towns in Rhode Island are likely to provide the most bang for the buck over the next 5, 10, 30 years? We’ll explore this topic in next week’s post. 

 

Tip #2: Do your homework on the schools.

As a former educator and school leader, it is stunning how often smart, well-intentioned parents base important decisions, like where their children will attend school, on prevailing opinions rather than facts. “Oh, I hear the school system is really good here,” they’ll say. Perception is not always reality in this case. Before narrowing your home search to a particular town, it's worth unpacking some of the assumptions. What’s the college persistence rate? How do the athletic and performing arts program compare to neighboring districts? Or, on a more current note, how effectively has the district supported learning during the pandemic?

 

In a future post, we’ll dive into the process of vetting school systems and show that there's more than meets the eye than the U.S. News and World Report ranked lists.

 

Tip #3: Walk the neighborhood (or have your realtor). 

Real estate sites like Zillow and Redfin allow buyers to access and consume lots of data about a property in a short amount of time. Paired with high res photos and now common 3D tours, buyers can get a good understanding for the condition, layout, and flow of a property before setting foot inside it. But for all the technological advancements, there are things a prospective homeowner feels that weigh heavily into the decision-making process. Is the neighborhood walkable? Is it on a quiet side street or a cut through from one part of town to another? What do you hear when you step outside? Cars? Crickets? Neighbor's barking dog? And how do these factors change as you walk a few blocks in either direction?

 

A realtor with local expertise and tools like Neighborhood Scout and Google Street View can go a long way to providing the whole picture.

 

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