House hacking in Boston or Cambridge, Somerville

[Jarrod Kohl]

Hello BP community!

So I have been around the forums for a while, and have been flipping houses all over Massachusetts, though the last few have been on Cape Cod. I am looking to pause on the flips and sink some money into some more buy and hold. 

Long story short, I have a connection who is open to selling some of their multifamily properties (they have a big portfolio) and although I am used to doing more value add investment these are all a lot more turnkey, which is probably a plus for the family and they have nice finishes.

One concern is that rents in parts of Boston have dropped 12% and I have seen individual rentals going for way under asking. To mitigate that, I have narrowed my choices down to about 3 properties which are mostly fully rented, but with 1 unit available. (aka 2/3 full) The big risk is with rents being as unstable as they are, how would you price them for forecasting. The benefit of the idea of house hacking is that I could take on more risk than normal assuming that even at way under current rents, I could still be "cashflowing"

The other benefit of doing it this way in Boston or Cambridge is to benefit from the new(ish) rules about Airbnb. The caveat with STR in MA is that as an owner occupier you have a lot more leeway to rent out the other units in your building. Though it has been hard to find something like this, now that I have a few to choose from I feel some analysis paralysis.

So the question is: Should I focus on the mostly full with one vacant? Or just look for the best overall deal and worry about renting the other units either STR or long term later?

[Adam Sankowski]

Hey, so I'm inclined to say that you should go for the best deal even if there is some vacancy there. More importantly I'd go with the house that you actually want to live in first and foremost- you're going to be there for a bit so might as well pick a good one :)

I am located in Somerville, right outside Union sq, and have a two family with an STR in it as well (so 3 units) and live in it. I agree that I have never before seen "for rent" signs on my street in windows, this is def. a new thing. There are at least 3-4 houses in the few blocks around us that seem to be struggling to find tenants. I think that this has to be because of colleges being shut down and also just I'm sure that enrollment is lower at them as well. I will say though that the houses that seem to be struggling for renters are doing several things very wrong:

1) they are using realtors who are charging fees/ half fees. No one is going to pay a fee right now. I get why you would use a realtor before but it's silly right now. 2) seems like their main source of advertising is a hand draw "for rent sign" ha and 3) You've gotta take the hit and just lower prices till you get some interest. The house on our street started at 2200 then when they didn't rent for 9/1 they dropped it to 2150... well its still not rented and it should have been at $1850 by 8/15. My point being that I think some people haven't gotten the message that you've gotta drop prices a bunch at least for this year. 

I agree that trying to find a long term renter right now in Boston is not a fun proposition. But also buying a place with tenants in place is scary because unless you can see the actual bank statement with money going in there is a zero chance you can evict if you have a non-paying tenant. Even with the moratorium technically lifted... the federal one is still in place and I'd be very wary of buying something tenanted with a long term tenant unless they are super solid. Which is possible since it seems like you know the seller and will hopefully be getting the "real" info on it but I don't care, if anything is already tenanted I'd want to see six months of real bank financials right now.

Here's where we've had success with our STR during all of this. We aren't doing anything short term on Airbnb, in fact it might still be not allowed? MA shut them down completely for a while...But we've transitioned to month to month furnished rentals and we've had a ton of interest! Seems to be coming from 1) travel nurses 2) people who live with older family members and need to quarantine after a trip somewhere before coming home and 3) college students or young professionals who moved home during the pandemic but now are either totally sick of being around their family or vice versa ha. Our STR doesn't have an oven or a washer dryer even and people are still very interested in it. We've had a nurse in there since May and another one coming in on 12/1 and it was no problem finding another and we've had 4-5 serious inquiries about it and we are still 1 month out from needing to find someone.

Now we are getting 1/3 of what we would be on Airbnb for 1-5 day long rentals but hey, its rented, and then the moment it feels like people are seriously traveling again we can just turn it right back into a short term Airbnb. I'd vote for finding the best of the lot and if there is vacancy, as long as you are willing to furnish and do some promotion of it (Airbnb, Kopa, Craigslist, Furnished finder) then I think you'll be fine with it as a month to month STR until Airbnb is back in business. There's no shortage of travel nurses these days. Biggest thing people are looking for is parking it seems and maybe some private outdoor space?

Also, if you can do an STR with it in the future we were making 6k a month in Somerville for a STR studio!!! Its crazy what people were paying before. I know that business travel might not come back immediately but still... and Now this is a higher end rental but still...

Anyways, that's my two cents and what I'm seeing in Somerville with renting. I think once colleges are back prices will be right back or close to where they were??? I'm curious what others think or what others are seeing??? Getting an STR legally up and running is obviously tricky though. Somerville is a pain. I think Cambridge is harder. Boston might be easier? I would research the heck out of the area though and talk to someone who's done it because what the posted rules are and what the zoning dept and the inspector actually allows seems to be very different. At least that was our experience in Somerville. Hit me up with any questions!