New Investor in Boston Area Looking for House Hacking Advice

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Joshua JanusBusiness Member

Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes

4y

@Mohammad Fanaei Study the requirements for an FHA loan like a book and make sure to set yourself up for success. Examples would be building up your credit, getting the most recent tax returns for the last 2 years in the same field, building up capital for the down payment, closing costs and 6 months in reserves so you can use as much of the rental income from the other units as your own income when you getting qualified. These are some barriers I had to make sure to be able to climb over. Let me know what questions you have.

Lien VuongBusiness Member

Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes

4y

Good morning,

Welcome to Boston! I think you have good options in Boston area with your reserves and some of your investing goals. I'm not confident you'd be able to find anything about 2 bathrooms as that's rarer in our housing stock. Most common would be 1-1.5 bathrooms that you an expand further. Have you thought about the areas you're interested in Boston? Where will your job be based out of?

MA also offers a variety of financing, outside of FHA, that is state sponsored, so talking to lenders that can elaborate on that would give you a good competitive edge in the market today.

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Marisa JManker

Investor · Chicago · Member since 2020 · 34 posts · 14 votes

4y

Hi There Gm and Congrats on your new found Journey Into Investing you deffitnatley have enough capitol to start off I used Rocket Mortgage and had a great Experience ! I was able to get a 2.99% for my Cash Re fi out Reach out If you want to check them out Because I have a Great Broker you can use at Rocket Mortgage very easy process check out my profile to read my story and experience I also Included pics of my finished rehab and Good Luck ! you Got this and Im available like I said If you need any advice

OP

Member since 2019 · 17 posts · 11 votes

4y

@Jay Thomas Thank you very much for the points that you had raised. I have created a spreadsheet that considers repair and maintenance (~between 5% to 10%) and capital expenditure (~7.5%). I think I can also think about the appliances and have a separate item line for them. I am going to be more active on the forums reading other people's experiences. Thanks again!

@Joshua Janus Thanks for pointing out what I need to consider and prepare for. I believe that I will be qualified for a 3.5% down payment with a credit score of 760+, and the loan limit is high enough ($770,500 for single-family and $986,400 for duplex in the Boston area). Once I find a realtor to work with, I have planned to talk with a loan broker to go over more details.

@Lien Vuong Thanks very much for the information about the local market. Having 2 bathrooms is not a must if it is not the norm in the local market. I will be working at Northeastern University. I have not yet decided on where exactly I would like to be and am open to the location as long as it can be accessed by public transportation. Some of the areas that I have looked at are Allston-Brighton, East Boston, Fenway-Kenmore, and Roslindale. I would be grateful if you know of any area that is more appropriate for investing and is accessible to my workplace by public transportation. Thanks!

@Marisa JManker Thanks for pointing that out. I am actually in the process of buying a property in Philadelphia and had not considered Rocket. I will reach out to them. Your story and profile of the rehabbed places were impressive. A lot of lessons to be learned.

Thanks again, everyone!

Tom Wagner

Real Estate Agent · Minneapolis · Member since 2019 · 338 posts · 219 votes

4y

Hi Mohammad, I definitely think you are thinking about it the right way and have a good plan. Some thoughts:

- Why limit yourself to 2 bedrooms per unit? And why limit your search to duplexes? While the self-sufficiency test gets tougher to pass every day rates creep closer to 5%, a 3- or 4-unit property could also be a great option.

- Do you need to have a place by 9/1? If not then giving yourself 4-6 months for your search instead of 3-4 months increases the likelihood that you'll find a 95th-percentile+ deal.

And the next thing I would start thinking about is where you fall on the spectrum of investing for cash flow vs investing for appreciation, as this will be one of the many factors that inform what neighborhoods / cities to concentrate on for your search.

OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Tom Wagner! Thank you very much for your message and the great points that you had raised.

You are completely right. I am actually not limited to the number of bedrooms. Since I have always rented a 2-bedroom apartment for myself and rented out one room to a roommate, that was my default choice. However, the number of bedrooms should not be a determining factor. As for preferring duplexes over more units, I thought that for the first step, it might be prudent to start small. Looking at prices, I would also like to be able to secure an FHA loan (which I know has a limit) for the price of the property that I will buy. However, if I find a 3- or 4-unit that is within my budget, then I can definitely consider those. I also think that it becomes more competitive as the number of units increases because bigger investors with more resources are more interested in those kinds of properties.

If I can find something by September, that would be ideal. However, I do not want to rush through the process. I am very flexible with timing. I can rent something for six months or so as I move to Boston and look for more favorable options. I know that the market cools down a bit (or at least it used to in the normal market conditions) as we move to fall and winter. However, with the anticipated increase in the interest rates, I am not sure how much the benefit of waiting outweighs the negative effects of the increased interest rates. In short, timing is fairly flexible for me.

I have thought about your last point, which is extremely important, and I am on the side of appreciation as opposed to cash flow. I do not need the cash flow over the next few years as I have a stable, well-paying job and a high saving rate. Appreciation is much more important to me.

Again, thank you very much for raising such great points! Look forward to having many more such conversations!

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

4y

Ok, first the bad news/stuff:

1) stay away from living in East Boston if you work in Northeastern. A royal pain in the *** as a commute. Through the bottleneck of the tunnel.

2) Fenway and JP and Allston/Brighton are pretty much out of reach financially for a duplex given the numbers you cite. If you can find something in Allston around the planned Harvard expansion you will do better than fine ultimately. You can find exceptions to my limits above but don't expect it to be quick. Roslindale you have a shot and I'd look there as it has a lot of virtues. You would be looking in the 800s or 900s most likely.

3) Market is extremely competitive, using an FHA loan is unlikely to succeed. Sellers won't take them if they can avoid it, and they can. I'd be wary of a rocket pre-approval too, not likely to have much credibility but thats less of an issue.

Better stuff:

1) House hacking is a great idea here and the housing stock in Boston was made for it. It is the old model, first generation using rental income to get by and building wealth. You won't "cash flow" but you will be able build equity and have a livable monthly expense. Typical two bedrooms here are around $2600 (you read that right) and thats not a luxury two bed.

2) Northeastern along with the other universities has some pretty nifty benefits around housing such as decent 401K loans etc.

3) I'd look carefully at Hyde Park. It is not the most glamorous part of Boston but some of the housing stock is great and the fairmont line coming in around there offers some upside. Neighboring Milton is a great spot for a house hack and a good commute. People will tell you to look at Dorchester...I agree. But remember Dorchester would be the second biggest city in the state if it wasn't part of Boston so there are lots of different neighborhoods within.

3) The above are all very city of Boston specific. The larger Boston metro area is large and if you want to commute you have a lot of options in various towns. Places of interest within commuting distance maybe waltham, maynard, quincy (mbta connections). Definitely others

4 Reply

Jeremy Nault

Real Estate Agent · Manchester, NH · Member since 2015 · 160 posts · 148 votes

4y

Hi @Tom Wagner I love house hacking as strategy, as many have mentioned it is one of the best ways to get your feet wet in the world of real estate investing. I am currently on my second house hack and I couldn't be more grateful for everything it has allowed me to do. Good Luck with your move, it sounds like you are on the right path! Feel free to reach out if you have any questions or just want to talk about house hacking.

Alex Dumas

Real Estate Agent · Newburyport, MA · Member since 2019 · 3 posts · 4 votes

4y

Hey Mohammad, house hacking is such a great strategy! A couple of things about the Boston area. 2 bath is going to be tough, 1-1.5 bath is pretty typical around here, especially if the home is older. In my opinion, avoid commuting, traveling or even looking at route 93 if you can avoid it, it can be a nightmare. Another thing to note is in this current market, getting an offer accepted on a multi-family is going to be tough, not impossible, but tough.

With all that said I think there are some great options in your price range! What part of the city are you thinking of?

Nick Riccio

Lender · Boston, MA · Member since 2018 · 171 posts · 137 votes

4y

Mohammad - I think you're spot-on with your logic and IMO a good agent is really important right now that works in this space. We help a lot of house-hackers/investors on the lending side, and see both good & bad. It takes a really good agent to help get the FHA offer accepted as there is a lot of education required for most sellers/selling agents.

For recommendations - I'm sure there are a lot of great agents on here with this experience but I know @Lien Vuong is top notch.

Jarrod Kohl

Boston, MA · Member since 2017 · 209 posts · 126 votes

4y

Quote from @Jonathan R McLaughlin:

Ok, first the bad news/stuff:

1) stay away from living in East Boston if you work in Northeastern. A royal pain in the *** as a commute. Through the bottleneck of the tunnel.

2) Fenway and JP and Allston/Brighton are pretty much out of reach financially for a duplex given the numbers you cite. If you can find something in Allston around the planned Harvard expansion you will do better than fine ultimately. You can find exceptions to my limits above but don't expect it to be quick. Roslindale you have a shot and I'd look there as it has a lot of virtues. You would be looking in the 800s or 900s most likely.

3) Market is extremely competitive, using an FHA loan is unlikely to succeed. Sellers won't take them if they can avoid it, and they can. I'd be wary of a rocket pre-approval too, not likely to have much credibility but thats less of an issue.

Better stuff:

1) House hacking is a great idea here and the housing stock in Boston was made for it. It is the old model, first generation using rental income to get by and building wealth. You won't "cash flow" but you will be able build equity and have a livable monthly expense. Typical two bedrooms here are around $2600 (you read that right) and thats not a luxury two bed.

2) Northeastern along with the other universities has some pretty nifty benefits around housing such as decent 401K loans etc.

3) I'd look carefully at Hyde Park. It is not the most glamorous part of Boston but some of the housing stock is great and the fairmont line coming in around there offers some upside. Neighboring Milton is a great spot for a house hack and a good commute. People will tell you to look at Dorchester...I agree. But remember Dorchester would be the second biggest city in the state if it wasn't part of Boston so there are lots of different neighborhoods within.

3) The above are all very city of Boston specific. The larger Boston metro area is large and if you want to commute you have a lot of options in various towns. Places of interest within commuting distance maybe waltham, maynard, quincy (mbta connections). Definitely others

I would agree that East Boston would be a bad choice (commuting-wise) for Northeastern. Some things to keep in mind for your house hack. If you can find one, a 1-3 unit place would also allow you the option to do Short Term Rentals, something that in Boston/Cambridge is now limited...unless you are renting out another unit in a building that you own. It would certainly be more hands on and active, (though you could get someone else to manage) but it would give nice ROI as it is a limited pool of STRs that fit this criteria.

Daniel Umstead

Realtor · Philadelphia, PA · Member since 2009 · 107 posts · 69 votes

4y

Quote from @Marisa JManker:

Hi There Gm and Congrats on your new found Journey Into Investing you deffitnatley have enough capitol to start off I used Rocket Mortgage and had a great Experience ! I was able to get a 2.99% for my Cash Re fi out Reach out If you want to check them out Because I have a Great Broker you can use at Rocket Mortgage very easy process check out my profile to read my story and experience I also Included pics of my finished rehab and Good Luck ! you Got this and Im available like I said If you need any advice

Good Morning Marisa,
I think I may have landed a goldmine as long as the owner is willing to talk of course, lol. I am a realtor and found a triplex under expired listings and going to look at the property today. I am looking to make the same approach to get started. I wanted to know your best methods of reaching out to sellers to discuss house hacking under seller financing in case this potential deal doesn't work out. And Congrats to you as well!

Kaiden Swainamer

Member since 2022 · 13 posts · 9 votes

4y

Congratulations on the new position!

I work about 15 mins south of Boston and am doing a house hack in southern ma on a multi-family and FHA financing. Looks like we are on the same path! My multi is about 45 mins south of Boston. MA has a ton of Landlord laws that are difficult to navigate, but once you take the time to understand them, they are not too bad! Just make sure you're within the laws and you'll be golden. I'm newer to the forums and investing, but if there's anything I can help with do not hesitate to reach out!

Grace Olinger

Greater Boston, MA · Member since 2021 · 6 posts · 10 votes

4y

Hi Mohammad,

Good luck on your search! I'm also a new investor/househacker, so I don't have as many insights that others veteran investors may have.

But I wanted to give you a heads up regarding your AirBnB plan, since I recently purchased a two fam property with FHA loan. I was originally planning on putting extra bedroom/bathroom in the basement to be able to AirBnB, but decided not to because of two pages in the loan closing documents. The FHA loan document package had two almost identical pages from HUD just to let you know that short term rentals under 30 days will be illegal on any part of the property while you have the FHA loan. You should either try to refi out as soon as possible after which you will no longer be bound by this contract or only do long term AirBnB (30+ days). Another option will be to look into Furnished Finder for traveling nurses who will need housing for ~90 days.

As far as the neighborhoods go, I would also check out north of the city (Everett, Malden, and Melrose are all on the Orange Line which should take you straight to Northeastern without a transfer), the properties are more affordable and Everett and Malden are developing quickly.

4 Reply

OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Jonathan R McLaughlin! Thank you so very much for giving me a list of some places to start looking into. That is exactly what I was looking for. I really appreciate your insight. Upon a quick look, it seems that I might be able to find some options within my price range in Allston and Roslindale. I will spend more time looking into more options that you had listed. I can't thank you enough for compiling this great list to start with.

In regards to your Point (3), unfortunately, I will not be able to pay more than about 150K as a downpayment, which would be okay for a conventional loan with a 20% downpayment up to a purchase price of 750K, which might not cover what I am looking for. I was hoping that I can use an FHA loan for the low downpayment option that it provides. I would have to look into finances further and see what other options might be available if the FHA route does not work. For example, I would have to see what resources, if any, Northeastern provides (as you had mentioned). Do you happen to know of any potential options?

As for your "good" points, I do not need to cash flow. As long as I can build equity, I would be golden. The rents are for sue much higher than in Philadelphia, and Philly was much more expensive when I moved here from Detroit :-D I have started to look into the areas that you had listed and will continue looking into them.

Again, THANK YOU so very much for such a great comment with actionable, specific recommendations.

OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Jeremy Nault! Thank you very much for your encouraging words. I would probably reach out to you when I have secured a property with more specific questions about the mechanics of the implementation and procedures of having tenants. There is a lot to be learned. I just have a quick question. Did you use an FHA loan to buy your first property (3% downpayment, no PMI, and first-time home buying grant)? Best of luck to you and keep in touch!

Hello @Alex Dumas! Thank you very much for your message. The 2-bathroom idea was based on what I had seen in Philly, which is a fairly typical feature of a lot of houses. I will keep that in mind that it is not typical in the Boston market. I have not yet decided on any specific region within Boston. As @Jonathan R McLaughlin had suggested, some neighborhoods to start with are Allston and Rosindale (probably unlikely), Chelsea, Everett, Milton, Dorchester, and possibly Hyde Park. Do you have any suggestions? Are there areas that I should avoid or places that I need to focus on? Thanks again for your help!

OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Nick Riccio! Thank you very much for your comment and recommendations. I really liked what you had done with the two properties that you had listed on your profile. They provide great ideas for someone like me that is starting anew. I will definitely reach out to you within a month or so to discuss financing (and potentially FHA options). I will get in touch with @Lien Vuong to discuss options with her. Thanks again for your comment.

Hello @Jarrod Kohl! Thank you very much for your comment and for pointing out STRs as an option. That is what I have thought about. I do to mind it being more hands-on as my job would allow me some flexibility. As @Grace Olinger has mentioned in a different comment, there might be some restrictions on the type of STRs if I get an FHA loan. But she has also suggested a couple of solutions that would work great. Thanks again for your comment!

OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Kaiden Swainamer! Thanks for your comment. It is encouraging to see that you have been able to secure your multi-family property with an FHA loan. Cogratulations! Your path seems to match what I would like to have. Thanks also for bringing up the landlord laws. It is on my to-do list to familiarize myself with the laws and required permits that I need to have as a new landlord as we get closer to when I would like to close on a property. I will definitely reach out to you soon. Thanks again for your comment!

Hello @Grace Olinger! Thank you very much for your comment and for pointing out the restrictions that an FHA loan puts on the possibility of having STRs under 30 days. I was not aware of such a restriction and had not read about it anywhere. Also, thank you for introducing me to Furnished Finder. I was not familiar with it, and it is exactly what I need right now, even before starting the house hacking, as I am trying to rent my room before taking a trip for a couple of months. It is a great resource. I also appreciate the list of locations that you recommended. Everett was on my radar but the other ones were not. Thanks again for your comment. I will be in touch as I progress through the journey.

Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

4y

@Mohammad Fanaei No Problem. You won't need an FHA loan though. With that amount to put down you should be OK at less than 20% for owner occ through some bank. Even if not, that should get you there.

Jeremy Nault

Real Estate Agent · Manchester, NH · Member since 2015 · 160 posts · 148 votes

4y

Hi @Mohammad Fanaei I have still yet to use an FHA loan for either of my house hacks. I definitely recommend shopping lender a bit to ensure you get the best loan option possible. In regards to the House hack you are referencing, I was able to qualify for a 3% Conventional Loan, and as far as the no PMI and Grant went, I was able to make that happen through persistence. I checked with multiple lenders seeing who could beat who as far as loan options go and was able to find one that offered no PMI with a grant at closing. I would love to say I knew exactly what I was doing, but that would be a lie. I was just young with little money and a goal to get into a property using as little money as possible. All in I ended up getting into my first property for just over 5K. I hope this helps! Good luck with your search and feel free to reach out with any questions!

OP

Member since 2019 · 17 posts · 11 votes

4y

Quote from @Jonathan R McLaughlin:

@Mohammad Fanaei No Problem. You won't need an FHA loan though. With that amount to put down you should be OK at less than 20% for owner occ through some bank. Even if not, that should get you there.

Great! Thank you. I would hope so.

OP

Member since 2019 · 17 posts · 11 votes

4y

Quote from @Jeremy Nault:

Hi @Mohammad Fanaei I have still yet to use an FHA loan for either of my house hacks. I definitely recommend shopping lender a bit to ensure you get the best loan option possible. In regards to the House hack you are referencing, I was able to qualify for a 3% Conventional Loan, and as far as the no PMI and Grant went, I was able to make that happen through persistence. I checked with multiple lenders seeing who could beat who as far as loan options go and was able to find one that offered no PMI with a grant at closing. I would love to say I knew exactly what I was doing, but that would be a lie. I was just young with little money and a goal to get into a property using as little money as possible. All in I ended up getting into my first property for just over 5K. I hope this helps! Good luck with your search and feel free to reach out with any questions!

Thank you for the clarification. That is one hell of persistence that has paid off very well. The deal that you were able to secure is awesome. I saw the 5K figure and thought I must be missing something. Verry well done! I will be in touch. Thanks again!

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

4y

Some thoughts:

$100k allows you to buy 2-4 unit with 20% down up to $450-500k range, so sellers won't get turned off by FHA financing on your offer.

On the other hand, you could do an FHA 203k loan to finance repairs that normally make a 2-4 unit property "un-mortgagable".
BONUS - Will also allow you to offer on properties with less competition => lower price.

Don't set yourself up to rush into a potentially poor decision! Start looking for STR's that give discount for 30-day stays.
BONUS #1: The market usually gets less competitive in the fall, heading into winter.
BONUS #2: Checking out the 30-day STR market for yourself, will also give you an understanding of the potential demand for 30-day+ STR if you decide to go with an FHA loan.

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OP

Member since 2019 · 17 posts · 11 votes

4y

Hello @Drew Sygit! Thank you very much for your comment. What a great set of recommendations. I agree with you that a combination of an FHA loan with a higher than usual downpayment might relieve the sellers, increasing the likelihood that they would accept an offer. On your other point, I will not try to rush through the process by setting a self-made deadline of August or September. I have just started to look further into options so that I get to know the area and consider different criteria in my search. My plan is exactly what you said: To use STRs for the first few weeks of my stay until I find a good deal (hopefully with reduced market demand at the start of the fall and the rise in the interest rates by then). I did the same when I moved from Detroit to Philadelphia and learned a lot just by observing how my live-in AirBnB host treated his customers and handled his business. Thanks again for your great suggestions!