Is Massachusetts impossible??

Question

I am looking to invest in my first property but live in Massachusetts. I am thinking that it is becoming more impossible the more I talk to a loan officer. I am looking to house house hack and it seems the multifarity's are too expensive in this state. Anyone struggling with this problem in Massachusetts?

Thank you

Joe R. · Answer

Fellow cash flow investors can expect ~$200-$400 per door in Western Mass, depending on building size, area, tenants, etc.  There are some unique elements about investing in this market that investors should consider:

- Stagnant job market and economic outlook.  Some big employers are leaving this area, lots more NGOs/Non profits popping up out here.

- Difficult and varying building inspection requirements.   Each town has their own "checklist" for a permitted renovation and or build out.  One town requires seismic analysis to be done on brick apartment buildings.  This analysis costs north of $100K.  We are known to have notoriously difficult and unreasonable building inspectors.

- Low tenant quality in some inner city areas

- High crime rates in most rental areas, e.g., Springfield, Holyoke.

- Common to all of Massachusetts, the legal environment favors tenants heavily, and in Western Mass courts, the tenants have all the rights.

- Contractors are more reasonable than Boston rates, but the solid ones are few and far between.

Andrew Freed · Answer

@Max Lichtenstein - I house hack and invest primarily in Worcester MA and cash flow pretty decently. You can still find stuff out here above the 1% rule. You can definitely find cash flowing properties in Massachusetts however it is on a spectrum. The closer you move to Boston, the more it skews towards appreciation and less towards cash flow. As you move farther away from Boston, the spectrum skews more towards cash flow and less appreciation. That is why I live Worcester, I personally feel like it is a nice balance of appreciation and cash flow. Nonetheless you can go all the way out to Holyoke or Springfield and find things in the 2% rule but also a lower class properties. I'm always happy to connect and chat about my experience.

Tom Wagner · Answer

I think tons of people are struggling with making the numbers work in Greater Boston right now, myself included. The recent run up in rates combined with the lack of a substantial pricing correction has caused cash flow to substantially decrease, often going negative for many properties.

If you buy and hold longterm the fundamentals still support real estate as a good investment: the Greater Boston population is growing and there is still a massive shortage of housing (as reflected in rent prices, now #2 nationally behind NYC).I think neighborhoods in the path of progress (Roxbury, East Boston, Roslindale, Watertown, Everett, etc) are well positioned to continue appreciating if viewed with a 10+ year lens.Good luck to you and others searching, and make sure you are working with an investor-focussed realtor to help you weigh all the factors that go into a successful house hack / investment.

Tyler Munroe · Answer

Seems like the days of living for free house hacking in Boston may be gone. With rates and prices the way they are, just look for opportunities where your mortgage payment will be much lower than what your place would rent for. For example, I'm house hacking now in a 2 family bought in 2020. Mortgage is ~3,500 and the other unit rents for 2,450. Difference of $1,250 is what I pay to live in an apartment that would rent for $4,000. I view that 2,750 as a huge win especially considering I have a tenant paying for the majority of the mortgage to help build equity on top of that.

Russell Brazil · Answer

They are pricey because demand is strong for them. What happens where demand is strong? Prices go up. Ive made plenty of money in the Boston market, and would have no qualms about continuing to invest there.

Bud Gaffney · Answer

@Max Lichtenstein plenty of markets in Mass cash flowing $. Please reach out and I can help. No charge, ever. :)

Brett Merrill · Answer

I agree with @Joe R. with the things to consider. However, I have had a lot of success with my clients as well as with my own portfolio in the Western MA area. I have units in B- neighborhoods with excellent tenants and little to no vacancy.  I believe it to be a very strong rental market with a lot of upside if you know where to look and with proper management.

Cameron Stewart · Answer

The dynamics are different, margins are a lot thinner, you need to be more buttoned up and more creative, but lots of money to be made if you do it right. You’re very rarely going to get NOI to outpace your mortgage payment if you maximize your leverage. Probably going to need to stack strategies (off-market, BRRRR, and student or short term rentals) and even then, you’ll need to rely on appreciation.What parts of MA are you looking? If you’re looking in the Boston area, areas like East Boston, Everett, Malden, Chelsea, Quincy, and Revere are going to be your best bet to scrape together cash flow. Going further out, Springfield can have some good deals, but residents are generally lower quality and rental market isn’t as robust.

Let me know if you need help shopping around, I get a lot of off-market deals, might be able to get something that works.

Colleen F. · Answer

@Max Lichtenstein  It is a tough state.  Pricey.    What area are you looking in?  There was a spike in prices that is falling off now I believe.  All I can say is keeping running your numbers and focus it won't be quick.  It took us almost a year for my son to buy a condo, he kept getting outbid.  On the selling side our house sold in days.  Keep your eyes on the market daily and don't overbid. Prices may show a correction with the higher interest rates.

Andrew Syrios · Answer

Massachusetts (particularly around Boston) is certainly one of the most expensive and challenging markets when it comes to cash flow. But is it impossible? No. it's just very difficult, particularly in this market, and may require leaving some cash in the property.

Is Massachusetts impossible??

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