House Hacking in the Boston area - Possible?

Question

Hi everyone! This is my first post after finding BP, and I’m excited to get involved. My partner & I are currently living and working in Boston, and getting ready to make a move to buy our first property in the next 3-6 months - but I could use some guidance. The market is insane here, and I’m trying to make sense of what the best path forward would be.

Here are some details on our situation:

• We both work in downtown Boston and bring in a combined annual income in the neighborhood of $220k. My credit score is around 740, his is in the 800s.
• Savings - I'm about to cash out some stock from my employer that should, after taxes, bring our savings up to $100-$120k.
• Expenses - Rent is costing us $30k/year. We live close to downtown Boston, and while the free commute is a huge plus, that's a huge chunk of cash I'd rather not be losing every year. Other expenses are about $25k left in student loan debt at a low rate with very manageable payments, and a small car payment.

The short version of this is that we both have healthy salaries, we have a good amount of savings after a lot of hard work, and we’re spending a lot of money on rent. The time feels right to do something, and we’d really like to house hack.

Anyone who knows the Boston market probably knows where I’m going with this… to stay anywhere near public transit to Boston, a multi-family in OK shape at best is probably going to cost $500k before any sort of rehab - if we’re lucky. A conventional loan would consume all of our cash, and we’d be a long ways from break-even on a duplex. Probably closer on a triplex, but they are extremely hard to find.

I think I have pretty tempered expectations. If we could stay in the area, house hack to offset at least a chunk of our mortgage payment, and start building equity, that would feel like a win vs. our current situation of burning $30k/year on rent. I’d love to hear from other BPers who know Boston -

• Is this just the nature of the Boston market right now? Anything sound off about what I’m seeing?
• Even if I could manage a down payment on a conventional loan, should I be considering FHA financing or a 203k loan on a property that needs work to retain some of my cash? Are these types of loans a competitive disadvantage in this market?
• Anything wildly different you’d be doing if you were me?

I’m open to any feedback on our situation. Trying to find the right path forward!

DJ Richmond · Answer

Hi @David Fuller, welcome to BP and Real Estate Investing! I was in a very similar situation to yours a little over a year ago. The only difference, I had a lot less cash to put down, so I took advantage of the FHA 3.5% down with a 203k Loan.

Long story short, we did a fair amount of rehab, rented out a unit, live in the other, then refinanced into conventional. We spent $54k on rehab to force $150k worth of appreciation, allowing us to eliminate PMI. We are now on the search for our next investment property.

All of this was done just south of Boston along the red line. The prices are high, but there is still definitely value to be had, even buying off the MLS. Though you've got to be more patient and do your due diligence in selecting your property. Last week, I just closed for my buyer client on his first investment property using this same strategy. I'd be happy to speak to you more in depth if you'd like to shoot me a message!

Chris S. · Answer

The first few posts seem to be spot on.  I bought a triple decker that is under 10 minutes walking to the Fields Corner T stop.  It was a massive pain to get the existing tenants out (competing with multiple offers didn't allow for getting a vacant unit at closing), but when it was all said and done the numbers worked out great for a house hack.

I really like the neighborhood because of the convenience to downtown and 93, but also the potential.  There is a lot of commercial space and some of it is up for grabs.  With prices as high as they are from Savin Hill north, I see a lot of change coming in terms of shops/restaurants in the coming years.  Since I moved I constantly ask myself "why would anyone live in Allston/Brighton and take the green line every day?"  I think the answer is simply the reputation that comes with Dorchester, but I have had nothing but positive experiences with neighbors and random strangers.

Aksel A. · Answer

Greetings @David Fuller and welcome to the journey.

I second @DJ Richmond  as I think I'm doing something very similar to him.

I have a residential 3 unit MF in Boston under contract ready for appraisal, expecting to close in a  month, in one of the nicest areas of Dorchester. It would be for over 650K and the repairs will amount to at least 30K. I am going to write a very extensive post on it after the close.

Don't expect to find a jewel in downtown Beacon Hill or Allston/Brighton unless you are willing to spend over million dollars and more. After scouting all these areas for months, I can tell you that Dorchester has some top notch neighborhoods, Port Norfolk, Adams Village, Savin Hills, Lower Mills, etc. Of course, you want to be willing to add a little delay to your commute, but not much really.

To answer your questions

• Is this just the nature of the Boston market right now? Anything sound off about what I’m seeing? Indeed, like I mentioned in my post here the Boston market is very bubblish and irrational these past months, every investor competing for "hot" areas, offering way more than ask price, especially with the reasonable rates and the summer season.
• Even if I could manage a down payment on a conventional loan, should I be considering FHAfinancing or a 203k loan on a property that needs work to retain some of my cash? Are these types of loans a competitive disadvantage in this market? I would not consider conventional 20% financing if you were looking for a MF in Boston to live, unless you have a LOT of cash reserves. And still, as an investor, you want to leverage your first Owner Occupied deal, going Conventional doesn't make sense if you have a big vision for your rental portfolio in the future.
• Anything wildly different you’d be doing if you were me? I think you mentioned it: 203K rehab loan, preferably the streamlined flavor to speed things up if you're in a rush.

Steve Bracero · Answer

@Dedric Polite

Awesome, you were able to find off market and house hack !

David Fuller · Answer

This is awesome insight all around - thanks so much.

@Aksel A. & @Chris S. , I'm definitely not expecting to find anything downtown. Depending on the area, I'd be really happy finding something in Dorchester. (It's been stunning to see how different the prices and the inventory are even vs. a year ago in Dorchester... I feel like it's now or never for some of the better neighborhoods.)

@DJ Richmond, I'll definitely take you up on your offer to chat a bit more about this. I know there are a lot of nuances when it comes to 203k but it feels like it's the way to go for us.

House Hacking in the Boston area - Possible?

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