Investing in the Greater Boston Area

[Darlene Julien]

Just wondering if anyone has invested in the Greater Boston area (Chelsea,Malden,Revere,Saugus, etc)? If so, how did it go and what type of properties did you invest in?  Are you interested in continuing to invest in the Greater Boston Area or are thinking about looking into that area?

[Prady T.]

As we are seeing the rents in Boston creeping up, the submarkets around the city are becoming increasingly viable options for buy and hold investment properties. I would focus your attention on East Boston, Revere, Everett, and Chelsea. Chelsea still has ways to go, but I predict it will be continue to gentrify in the next 5-10 years. 

What's key here is that the most significant tenant pool in these areas are working professionals/grad students who are being outpriced in Back Bay, Southie, South End, North End.  These tenants tend to be very good: clean, reliable, and professional. Because of the large amount of educational institutions and white-collar professions available in Boston, compounded with a mostly reliable MBTA system, you'll see these attractive tenants having no problem living in areas that will previous C-areas provided that their units are in good shape. (Think Seaport, and Southie)

Do note, that the properties you will likely come across in these areas will require major work; so I strongly believe that building a team that can provide rehab and other construction work will be a major asset. You're unlikely to come across 8%+ cap rate properties that are turnkey in these submarkets (with the exception of Worcester, but then you're dealing with a whole different tenant base.) 

I have invested in Boston for a long time, and as we are seeing the growth in the submarkets, including increasing gentrification, I have doubled down. My area of focus is East Boston. These investment will require some major work, but I have found them to be stellar cash-flowing investments - even better than some of my out-of-state investments, with the added benefit that my tenant base gives me little trouble. I have actually been able to handle the property management of these larger MFs internally, saving me more costs. 

Here's where some first-time investors can make mistakes - numbers paint just one picture. With many properties, you have to absolutely ensure that you're getting a manageable tenant base. If you're getting difficult tenants, then you can run into many, many problems and it's seriously not worth it the extra percentage on the cap rate you could get. 

Cheers,
PT

@Darlene Julien