House Hacking in Boston

[Scott Jacobs]

I am looking to house hack in the greater Boston area by purchasing a two or three-family so we can house hack. My wife and I currently make 300k a year from our corporate jobs, but we would like to get into real estate investing. We have no debt and each of us has a credit score of 780+.  I just finished building out my investment property calculator in excel to run the numbers and I have read a few books (Rich Dad Poor Dad, The Book on Rental Property Investing, and Long Distance Real Estate Investing), but I wanted to get insight from people on what is the best strategy for the following questions below:

Where are the best areas to invest closer to the city? 

What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)

What is a jumbo loan? Is it a bad or a good thing?

Is now a good time to invest or should we wait a bit longer for prices to drop?

Where is the best place to look to find a mentor?

What other pieces of advice would you give us as we start our journey?

[Cameron Stewart]

Hey Scott! Awesome to see that you’ve obviously done a lot of mental, emotional, and financial prep work. You’re clearly right on the cusp of pulling the trigger.

Where are the best areas to invest closer to the city?

Depends what you mean “closer to the city”. Neighborhoods like East Boston and Roxbury (not West Roxbury) are kind of mid-way through an investor takeover, so I’d recommend either of those. Almost certainly property values and rents are going to rise faster than the average in the market, and current reputation lags behind the actual quality of the areas. Somerville is also really good, going to be worse cash flow, but a more pleasant area if you’re going to owner occupy one of the units.

What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)

Depends on the financials. If the interest rate you're getting on the loan is lower than the cash on cash rate of return (i.e. you're getting positive leverage) you should put as little down as possible. If the interest rate on the loan is higher than the CoC rate of return (negative leverage) you should put as much down as possible.

What is a jumbo loan? Is it a bad or a good thing?

Just a line of demarcation for a purchase price that is above a certain dollar amount. These days there is not much difference.

Is now a good time to invest or should we wait a bit longer for prices to drop?

Depends on the deal. In the long run, you’ll regret it if you found a good deal but didn’t pull the trigger because you were hoping prices would go down or something like that. If the deal is good, go for it now.

Where is the best place to look to find a mentor?

A mentor is never going to arrive to you pre-packaged as “a mentor”. Start going to groups and meetups where you have something to bring to the table, and where real estate professionals might be. Network like crazy and just let the mentorship evolve naturally.

What other pieces of advice would you give us as we start our journey?

It’s okay to be scared, don’t wait until you’re not scared anymore. It sounds like you’re probably already more prepared than the majority of people when they get into it. You can never know everything upfront, some things you can only learn by going through the experience, messing up, and remembering the lesson.