Looking for duplex outside Boston (Medford, Malden, Somerville)

[Alex Johnson]

Hey BP,

My brother and I (27 and 31) both live separately in the Boston area, and have an idea to buy a rental property within the next few months. We plan to but a duplex and live in one unit, renting the other unit out (finding a deal that keeps our out of pocket monthly costs minimal). In a perfect world, we would find something in South Medford / Somerville MA. We plan on living there, so using an FHA with 3.5% down, therefore PMI will be involved. Any suggestions?? I'm guessing we will be looking at the 600,000-900,000 range, but I'm a first timer, so this is all just my most educated guess... coming here for advice first.

Any help is appreciated!!

-Alex

[Adam Sankowski]

@Alex Johnson Hey great idea on the house hack.  I did the same thing with a two family back in 2013 in Union square and without doubt the best decision of my life.  But, a few things to keep in mind that might add a few extra challenges...

@Dan K. brings up an excellent point with the purchase limits. I don't know what they are for FHA but 881K sounds about right. Unfortunately whoever makes these limits for the government clear don't live in an expensive coastal city.

Here's the other problem that you'll run into quickly with an FHA, especially in a "hot" market like Somerville. No one will accept them. We were going to use one when we bought but every reasonably priced property in Somerville is going to have multiple offers. Especially since a developer can turn a 900K two family into 2 - 1 million dollar condos. So you're making offers with an FHA and others are offering cash. You'll lose everytime which is what happened to us. We eventually had to go back and beg borrow and steal to get a larger downpayment together.

Also in general you'll run into developers trying to scope up any Multi family in Somerville.  You can try for it but I really like Medford and Malden center.  Everett is a good option too and there I'd focus on this small little neighborhood that's close to the casino and right near nightshift brewing.  Google night shift and look at that area.  Malden center is gonna be big in a few years and a lot of people are already moving there and Malden schools aren't bad where as Revere or Everett still have a ways to go. 

Here is one little tip that might give you the edge in Somerville and might even make a single family just as good as a house hack.  Here is the link to the Somerville proposed zoning changes: https://www.somervillezoning.com/

If you read through everything carefully it basically looks like they are proposing that if you have a large enough lot size or enough frontage you can build an "accessory dwelling" behind your house. This means that you might be able to build a single family behind another single family in the future. You used to be able to do this and you can see these types of houses all over Somerville but they outlawed them at some point... Considering that there is barely a SFH in Somerville for under 1.2 million and new construction is maybe $250 a square foot in the city, that's almost a 600K new build profit... Now they've been trying to pass this for years but... things are moving. This info might help you in finding something that might have real future potential. Medford and Malden might have their own versions of this.

Also, Airbnb is BIG money in Somerville and although they are very lax on their enforcement of the code, technically you can't Airbnb a stand alone unit but you can Airbnb a room in your house, making a SFH Airbnb-able and a 2 family less so FYI. You kinda need some creative options to compete against developers there. Good luck!

Also, just a prediction but in ten years I think we are all going to be talking about "remember the time when Mattapan was sketchy".  That's the most underpriced area of the city if you can't find numbers that work in Somerville/ Malden/ Medford.