Rookie in Boston, MA

[Erica S.]

Hi all,

My fiancé and I currently live (rent) in the North End neighborhood of Boston, and while we love the location and convenience, we're both sick of forking over 1/3 of our income each month in rent. I've been doing research over the past 6 or so months and know for sure I want our first property to be an investment. I've found a lot of great info on biggerpockets so I figured I would ask you all directly to please help me! :)

Boston and the neighboring towns seems to be one of those areas that (from what I've seen) simply never meets the 1 or 2% rules. So we're ultimately looking for something that will cut down our monthly costs (either through lower cost of living or supplemental / rental income).

Option 1: Purchase two or three family owner-occupied home. By doing owner-occupied we'd get to take advantage of the lower down payment which is great. But in this scenario in towns like Quincy (or first choice) or Dorchester/Eastie etc., my model shows us not cash-flowing at all (we'd still need to put in ~$1000 per month, which is much better than what we pay in rent currently, but still). So big question here is: long term, is it worth getting a multi-family that won't cash flow as owner occupied, but has the potential to do so once we're renting out all units? 

Option 2: Purchase a (much-less-expensive-than-a-multi-family) condo in an up and coming area like Quincy, save a buttload on rent, use those savings as capital for our next real estate investment (or get a line of credit based on our equity in the condo), then rent the unit out when we move onto bigger and better things. Positive here is that the condos in this market are (for the most part) all updated and would bring in higher rent whenever we move out, versus the multi-families on the market which would likely need to be updated (at very least cosmetically) before we could get the same rent prices.

Since this turned into a long-winded and very specific question/prompt, any insight/advice you all have specific to the Boston/South Shore markets would be much appreciated!

Erica

[Dave Foster]

@Erica S.,  I wanted to expand just a little on @Patrick Gleason's recommendation for a 1031 exchange as a next step in your investing. The existence of an FHA loan is not what precludes you from doing a 1031 exchange. The use of a property for investment is the key to it being eligible for a 1031. However, the use of the property as your primary residence is what makes it eligible for FHA financing.

While these two seem incompatible it is not unheard of at all for someone to move into a property with an FHA loan and live in it for a year or two and then change your mind and convert it to investment. The key is in your integrity. Your loan docs will tell the story of your minimum residence period but you are not precluded from changing your mind after meeting your minimum residency requirement. Just make very sure to keep your integrity intact. There is a huge difference from buying your residence as you describe and later changing your mind and converting it to investment, versus trying to fraudulently buy an investment property by claiming it will be your primary residence.