Who’s Actually Buying Boston’s 2-Family Homes?

[Tyler Munroe]

I've been analyzing a lot of two-family properties in the Boston area lately, and almost every one that is rent-ready turns out to be negative cash flow or break even at best. If you were to buy one of these with traditional financing—20% down at a 7% interest rate—you would actually be paying out of pocket every month just to own the property. The rents simply do not cover the mortgage and expenses.

That raises an important question: who is actually buying these properties?

The fact is, these properties are selling, and there are several key groups making these purchases.

1. Developers Converting to Condos

In high-priced areas like Boston, Cambridge, Somerville, and Brookline, many developers buy two-family homes with the intention of converting them into condos. If they can expand the square footage—whether by finishing a basement, adding an attic space, or making other improvements—they can increase the value and sell at a higher price. For them, cash flow is not the primary goal; it is about appreciation and resale value.

2. 1031 Exchange Investors

Another group purchasing these properties includes investors utilizing 1031 exchanges. A 1031 exchange allows an investor to sell an investment property and reinvest the proceeds into another property, deferring capital gains taxes. Since these buyers often have large sums of money from their previous sale, they can put down a significant amount of cash, keeping their mortgage payments low and making the numbers work despite high purchase prices.

3. Foreign Investors Buying in Cash

Boston is considered a stable real estate market with strong appreciation, making it attractive to international investors. Many of these buyers purchase properties in cash, meaning they are not concerned about monthly mortgage payments or short-term cash flow. Instead, they view real estate in Boston as a safe place to park their money while benefiting from long-term appreciation.

4. House Hackers

Some owner-occupants are still using the house hacking strategy, where they live in one unit and rent out the other to offset costs. This approach used to be a great way to build wealth, but with today’s higher prices, it is becoming more difficult. That said, some buyers still choose this route because it can be cheaper than renting or buying a single-family home, and they hope that rental income will improve over time.

If you are looking for cash flow in the Boston market, the numbers may not be in your favor right now. However, there's definitely areas just outside the city where deals are starting to pencil, so that's great to see.

I’d love to hear from others in the market—what are your thoughts? Are there other types of buyers I missed? Is there still opportunity in Boston’s two-family market despite the challenges?

I posted the numbers on an IG reel if you'd like to see some examples, I'm @WealthyREI.