Pawtucket Multifamily Cap Rates for 2–10 Unit Investors

Are you trying to pin down realistic cap rates for a 2–10 unit building in Pawtucket? With small-multifamily, a one or two percent swing can make or break a deal. You want a clear way to translate local rent, expenses, and recent sales into a defensible offer. This guide gives you a practical framework to estimate Pawtucket cap rates, build better comps, underwrite like a pro, and know when to bring in help. Let’s dive in.

What sets Pawtucket cap rates

Cap rates in Pawtucket are set by what similar buildings actually sold for recently, adjusted for your property’s NOI. National reports are helpful for context, but small 2–10 unit assets trade on local comps. Start with micro-neighborhood sales and real income and expenses.

Useful sources to compile those inputs include local MLS and commercial platforms for recent solds, assessor and tax records for sale and parcel data, and rent and vacancy benchmarks from credible rental datasets. Round out the picture with planning and code info, plus on-the-ground feedback from local brokers and property managers.

Build strong Pawtucket comps

Aim for at least 6–12 sold comps from the past 12–24 months that match unit count, unit mix, condition, and neighborhood. Confirm sale price, date, taxes, and any available income details.

For each comp:

• Estimate or confirm Effective Gross Income and normalized operating expenses.
• Derive NOI, including reserves for replacement.
• Compute implied cap rate = NOI divided by sale price.
• Group comps by condition and micro-neighborhood to find realistic bands.

Cap-rate bands to expect

Treat these bands as directional starting points, then confirm with current Pawtucket sold comps before you bid.

• Core or stabilized, well-renovated assets in stronger Pawtucket pockets: roughly mid-single digit caps.
• Typical stabilized small buildings in average neighborhoods: mid to high single digit caps.
• Value-add or heavier-lift properties with vacancy, below-market rents, or deferred capital: high single digit to low double digit caps.

Remember that national or institutional reports often skew lower because they emphasize larger assets. Small 2–10 unit buildings typically show higher cap rates in the same metro due to risk and buyer pool differences.

Key drivers in Pawtucket

Several factors move cap rates block by block:

• Location and access: proximity to downtown Pawtucket, transit corridors, and employment nodes increases competition and compresses caps.
• Size and unit mix: 2–4 units often trade differently from 5–10 units. Smaller buildings can show higher per-unit pricing and sometimes higher caps due to management intensity and liquidity.
• Condition and renovations: turnkey interiors and updated systems usually command lower caps. Needed exterior, structural, or systems work pushes caps higher.
• Rent roll quality: in-place, market-level rents with stable tenancy compress caps. Below-market rents, high turnover, or short lease terms raise risk and cap.
• Taxes, utilities, and insurance: higher effective property taxes or owner-paid utilities increase operating costs and required yield.
• Vacancy and demand: shifts in local vacancy and rent growth change expected NOI and investor return targets.
• Financing climate: interest rates, leverage, and lender DSCR standards affect what yield investors require.
• Regulation and risk: local code enforcement, eviction timelines, and potential ordinance changes influence perceived risk and pricing.
• Liquidity and buyer pool: small assets attract local investors, which increases dispersion in realized cap rates.

Underwriting, step by step

Cap rate comes from the relationship between a property’s NOI and price. Here’s a straightforward process for Pawtucket 2–10 unit deals.

• Define core terms:

  • Gross Potential Rent: market rent at full occupancy.
  • Effective Gross Income: GPR minus vacancy and collection loss, plus other income.
  • Operating Expenses: taxes, insurance, repairs, owner-paid utilities, management, and routine property costs.
  • Net Operating Income: EGI minus operating expenses and reserves, before debt and capital improvements.
  • Cap Rate: NOI divided by purchase price.
  • GRM and Cash-on-Cash: quick screening and equity yield metrics to cross-check.

• Underwriting checklist:

  1. Collect the rent roll and verify with leases and deposits.
  2. Compare in-place rents with market rents using multiple rent sources and local checks.
  3. Build GPR, apply realistic vacancy and collection loss, and add other income to arrive at EGI.
  4. Compile the last 12 months of operating expenses and normalize one-time or owner-specific items.
  5. Subtract normalized operating expenses and reserves to get NOI.
  6. Compute the implied cap rate and compare with similar Pawtucket comps.
  7. Run sensitivities for rent, vacancy, and unexpected capital needs.
  8. Layer in lender terms to model debt service and cash-on-cash returns.

Practical allowances

• Vacancy and collections: 5 to 10 percent for stabilized assets, adjusted for asset age and tenant turnover.
• Operating expense ratio: often 30 to 50 percent of EGI for small multifamily, depending on taxes, utilities, and maintenance.
• Reserves for replacement: budget roughly 250 to 600 dollars per unit per year, higher for older systems.
• Management fee: 6 to 10 percent of EGI if you outsource. Factor your time if you self-manage.

Example calculation

• Asking price: 900,000 dollars
• EGI after vacancy: 108,000 dollars
• Operating expenses plus reserves: 43,200 dollars (40 percent of EGI)
• NOI: 64,800 dollars
• Implied cap rate: 64,800 divided by 900,000 equals 7.2 percent

Interpretation: if recent Pawtucket comps for similar buildings show 6.0 to 7.0 percent caps, a 7.2 percent implied cap may indicate an attractive price or additional risk to diligence, such as capital projects or leasing uncertainty.

Taxes, utilities, and code checks

Normalize taxes using current assessments and recent tax payment history. In Providence County, assessment changes can materially shift expenses. Confirm who pays each utility, whether common area and unit utilities are separated, and if submetering is feasible. Ask about inspection history and any open code items, because compliance work can create one-time costs that affect your near-term NOI.

Use comps to price your offer

• Select comps that match unit count, condition, and location as closely as possible.
• Calculate each comp’s implied cap rate, then take the mean or median.
• Apply that cap rate to your expected stabilized NOI to estimate value.
• Adjust for differences like deferred maintenance, lease-up risk, or clear upside in rents.

Negotiation levers that help

• Inspection or repair credits tied to documented capital needs.
• Price adjustments for major deferred items discovered during diligence.
• Flexible closing timelines paired with a fair due-diligence period.
• Earnest money protections related to code, structural, or environmental findings.

When to bring in a CPM

A Certified Property Manager can add structure if you plan to scale or need formal asset management. Involve a CPM when you want standardized budgeting and reporting, a capital improvement plan, or a pre-acquisition operational audit to validate income and expense assumptions. For a single small building, a capable local manager with small-multifamily experience can be cost-effective; use a CPM when portfolio needs grow or complexity rises.

Other professionals to engage

• Small-multifamily broker with active Pawtucket experience.
• CPA experienced in real estate for entity and tax planning.
• Real estate attorney for contracts, title, and tenant-law review.
• Licensed inspector and specialists for roof, structure, or environmental items.
• Lender or loan officer early for loan sizing and DSCR assumptions.
• Insurance broker familiar with Rhode Island multifamily risks.

Street-level tips and red flags

Practical tips:

• Expect block-level variability and drive the area at different times.
• Cross-check market rents using listings and direct outreach to local landlords.
• Budget for capital items common in older Rhode Island housing stock, including boilers, roofs, exterior carpentry, and safety upgrades.
• Plan for seasonality in leasing and turnovers.

Red flags:

• Rent rolls that cannot be verified with leases and deposits.
• Recurring code violations or unpaid municipal fines.
• Major deferred capital with no seller concessions.
• Persistent high vacancy or tenant issues that suggest ongoing instability.

Next steps

If you are evaluating a Pawtucket 2–10 unit property, start by assembling 8–12 sold comps, normalize the NOI, and fit your subject into the right cap-rate band based on condition and risk. Validate assumptions with real rent and expense data, run sensitivity cases, and be ready to adjust for taxes, utilities, and code items. When you want help refining comps, underwriting, and a practical reposition plan, reach out to a local advisor who works these assets every week.

Ready for a second set of eyes on your deal or a tailored comp set? Connect with Scott Champagne for data-driven underwriting and full-service investor support.

FAQs

What is a cap rate for Pawtucket multifamily?

• A cap rate is the property’s NOI divided by price, expressed as a percentage, and it reflects the yield investors require for similar Pawtucket 2–10 unit buildings.

How many Pawtucket comps should I use?

• Use at least 6 to 12 sold comps from the last 12 to 24 months that closely match unit count, condition, and location, then compute each comp’s implied cap.

What cap rate is good for a 2–10 unit in Pawtucket?

• Treat cap rates as bands: mid-single digits for core assets, mid to high single digits for typical stabilized buildings, and higher for value-add; confirm with current sold comps.

How do property taxes affect cap rate in Providence County?

• Higher effective taxes raise operating expenses and the required investor yield, so they push cap rates up and can lower the price you are willing to pay.

When should I hire a Certified Property Manager in Pawtucket?

• Bring in a CPM when you plan to scale, need formal budgeting and reporting, want an acquisition audit, or are executing a reposition that benefits from professional asset management.