Investing in Lowell/Lynn MA - Question from Beginner

[Matt T.]

Hello all, 

I am a young/beginner investor living in Boston, MA. Within the past two years I graduated college and began work. I am nearing the point of looking to purchase a multifamily in areas near my work. I work just North of Boston and was thinking of looking to purchase in areas that I can afford (I have been researching in Lowell and Lynn). 

My plan was to House Hack with a duplex/multifamily in one of these areas. I would apply for an FHA loan, put down about 8-10%. A few concerns that I have are

1) I have been reading this forum and understand that prices are very high and therefore cash flow opportunities is very hard. 

2) I have no experience with renovating/fixing older properties, and have no real estate connections to help me find properties that are fair value. I am thinking I will have to go through a broker. 

3) I have heard that these places are probably "C" class neighborhoods, so the prospect of living in them is a bit intimidating. 

My questions are: 

1) Even if I cannot cash flow, should I not even consider buying? I am living at home now so soon I will have to move out, I figured it would be best to "House Hack" and get a negative cash flow as opposed to paying 800 to 900 in rent. 

2) Will I not be getting a good deal if I go through a broker, or buy a turn key property? 

3) Do I need a lot of experience to buy a run down property and renovate it? 

4) Does anyone have experience buying/renting/living in Lynn or Lowell? Any tips or advice?

Any advice would be awesome. I would love to speak with someone who has experience in these areas. Thank you.

[Christopher Leslie]

@Matt T.

Hi,

I was in a very similar position to yours. I was living at home and searching for a multi in the Boston area as well. After relentless searching (primarily MLS) I narrowed down my only options to Dorchester/Mattapan or Lynn. Also I wasn't able to find any multi's that would qualify for conventional financing in my price range, so I went with a single family in Lynn. I'm 5 months into a live in flip which I plan to roll into a multi when I sell.

I want to give you a heads up this is my first deal so don’t take my words as gospel, I’m a beginner as well.  With that being said I’m a year ahead of you and I’ve learned a ton since I first started out.  A lot of what I’ve learned is very applicable to your situation so forgive my lengthy ness but it may help you out.

Here’s my thoughts on the market that I’ve formulated through observation and personal opinions, not real hardcore market research backed up by numbers.  I think Boston is blowing up and Lynn is going to be a different city in 10 years.  I’ve worked different construction industries all around the Boston area and there is no where for people to buy affordable houses anymore.  I think partly because of the hot market but also because the city of Boston is exploding.  Within the last year I am the 3rd “millennial” in my family to purchase a house in Lynn.  If you can find a good deal in Chelsea or Revere I would scoop it up but I was priced out of those areas.  I can't speak to the cash flow in those areas but more the demand for proximity to Boston.  I think demand for these locations will overcome market fluctuation in the long run.

In Lynn stay away from the Lynn commons in the center of the city.  I bought in Ward 1 on the North West side of town if you look on a map.  There are some nice neighborhoods up there and good proximity to route 95.  Lynn shore drive up by Swampscott is nice too but very expensive.  West Lynn has some good neighborhoods too.  I used to drive the neighbor hoods before I even asked my agent to schedule a viewing because there are some bad areas.

Something to look out for is down payment assistance in those cities.  I was able to squeeze into the "low income" category which qualified me for $5k towards my down payment from the city of Lynn.  After 5 years I don't have to pay it back.

Look into a Fannie Mae or Freddie Mac first time home buyers loan. A former broker who is now a first time home buyer counselor told me to do the same. You can avoid the $5000 start up premium which you have to pay for FHA's mortgage insurance. Also apparently the mortgage insurance is cheaper and goes away when you own 20% of the house, when with FHA you have to refinance to get rid of that PMI. The down side is you need a better debt to income ratio, which I didn't qualify for. If you do go FHA and you sell within 5 years then you get a portion of that $5000 premium returned to you, if you ask for it.

Good Luck!