Best Boston Suburbs for House Hacking?

Question

Hi everyone! I'm new to the BiggerPockets online community (though I've been listening to the podcast for years) & excited to catch up on all of the forums.

I'm looking to get opinions on which Boston suburbs/neighborhoods tend to be best for house hacking? For context: I currently live in Cambridge, and have been poking around the market for 2-4 unit multi-families. I'm not interested in sharing my space with others (I have a partner who would contribute towards the mortgage & we don't want to live with other people in the same unit). From very rough calculations it seems like it would be challenging to cash flow -- or even get close to breaking even -- on several of the multi-family properties on the market right now.

I'm still reading up and learning about identifying optimal deals for house hacking, but curious if anyone has any towns they'd recommend exploring in the Greater Boston Area? Thanks so much in advance!

Ryan Thomson · Answer

@Jessica Lohr I imagine that specific neighborhoods/suburbs are less important than how the actual house will perform and the options it has for exit plans. When it comes to House Hacking location I usually tell me clients in Colorado Springs that the house is more important than the exact neighborhood.

Three things to consider that are more important than location (but also take location into account):

• 1. Are you comfortable living there for a year?
• 2. Does it provide an acceptable house hacking strategy while you live there?
• 3. Does it have a good exit plan for renting the property when you scale to the 2nd house in a year?

Remember if your goal is to scale you only have to live there for a year.

If you have narrowed it down to duplexes than I would entertain any duplex that meets the three criteria above.

Brady Graham · Answer

@Jessica Lohr

I would double down on @Ryan Thomson's perspective going into your search.

Secondly, many people are unaware of the self sufficiency test for 3-4 unit MF. With rates where they are, I haven't personally seen anything on market that would pass this test for financing. In short, this test requires 75% of all the units to cover the debt service on the loan. A duplex, on the other hand, does not have this restriction.

Third, layering on an MTR or STR and your ne cash flow will be better, in exchange for additional work. Maybe your current workload would allow for this extra work, but perhaps not.

Lastly, I would challenge you, as I do with two of my clients going down the same path, to look at your calculations not based on cash flow but money saved. Since you mentioned you listen to the podcast, David Greene regularly talks about this. I believe it is critical in todays market.

If you current rent(s) in Cambridge for you and your partner are, for example, $3000/mo, and you purchase a duplex that generates $2500/mo LTR and your mortgage is $4000/mo. Your net cost of living has been reduced from $3000 to $1500. You're essentially "cash flowing" $1500/mo via savings, not to mention any tax benefits, amortization on the loan, and any appreciation be it forced or natural market.

I hope this help...

Now to actually answer your question of towns, how far are you willing to commute and what kind of financing are you qualified for?

Scott Mac · Answer

From a birds eye view:

[1] There will be places you feel like you fit in like a puzzle piece.

[2] There will be places you wished you lived there (if you could).

[3] There will be places you would be embarrassed to live.

[4] There will be places you would feel out of place in.

[5] There will be places you would be afraid to live in.

If you can make #2 happen great, with #1 as a fallback, and hopefully not #3, #4 or #5 (but if that's all that's available (???)

Good Luck!

Kyle Spearin · Answer

@Jessica Lohr this is such a great question and a real dilemma for people who want to house hack. I'm going to try to answer this in a few different ways to give you some options.1. You likely won't cash flow in a multi in Boston/CambridgeSomerville unless you use a short or medium term rental strategy and price points will be higher. You can probably live in this area and pay less per month than you would paying rent even if it's not cash flowing if you buy a 3 unit, though.2. If cash flow is your priority and you don't need to be close to the city, focus on areas that have larger inventories of multis (Worcester, Lowell, New Bedford, Fall River, Brockton, etc.). Since you'd be living in one of these units and these are all cities, be sure to really research streets/locations. Better neighborhoods will likely also attract better tenants!3. Single family w/in law suite-- you can find these just about anywhere. As a general rule of thumb, home prices and rent prices will probably be higher in Boston/Cambridge proper, areas with great schools, and areas with great proximity to the city.

Justin Hammerle · Answer

@Jessica Lohr - if your looking for value relative to rental income, I would explore the towns around the I-95 corridor heading south towards RI stopping at I-495; Route 24 around Brockton; Route 9 from Framingham to Worcester.  If you want to stay close to the city I would focus in on Chelsea, Everett, and Revere.

Jon McCarron · Answer

Hi @Jessica Lohr

I like the towns of Beverly and Salem on the north shore. Both towns have Colleges/Universities, train access to Boston, and a mix of people who work locally and commute to work, so there is always a solid and diverse renter population. Both have fun downtown areas and beaches.

But, I think your goal for deciding where to house hack comes down to a couple of things:

1) Will the house hack drastically lower your housing payment?

2) Are you buying to start a portfolio? Or are you trying to be able to afford the place where you want to live? Two different strategies and comfort levels

I have done 2 house hacks in the Beverly/Salem area. The 1st was a 2 family. My wife and I came out of pocket about $150/month to cover the remaining part of our mortgage. We now rent out both apartments and make around $1700 over our mortgage.

The second on paper does not look great. It's another 2 family. We come out of pocket $1350 a month. It is however a more affordable option for us than renting, or buying a single family home in the area. We had our first child a year ago, and needed more space. The apartment we occupy now is a 4 bed 2 full bath unit. That would probably be between $2800-3400 a month if we were to try and rent. So, we chose to live in the area we wanted, and by house hacking, can afford to do so. And, once we move out of this current house hack, we will be another $1700 over our mortgage. (As a note: your mortgage isn't your only expense when owning a home, the numbers are more to paint a picture). Both of our house hacks we will be holding long term as part of a growing portfolio.

So, it's important to choose your strategy from the outset. Either way, it should drastically reduce your housing expense, regardless. The savings you get from house hacking is where the real monetary power is. If you can save $1000/month on your housing, you can use that to pay off debt, build/buy investments, save for the next house hack, travel, etc.

Hope that perspective helps!

Jon

Denis Vaughan · Answer

@Jessica Lohr, I'm doing this right now in Somerville. As others have mentioned its all a trade off. Where would you be happy living/where is acceptable to live vs where will make the most financial sense.

I really wanted Cambridge but just couldn't make the numbers work and bought a 3 family in Somerville as a compromise. 10% down, and would essentially break even if all 3 were rented so I'm paying what I would pay in rent effectively. But getting the debt paydown, tax benefits etc so I'm ok with it. Other neighborhoods I considered included Watertown, Dorchester, East Boston. Would likely do better on numbers but still hard to cash flow in current conditions

For cash-flow you'd have to look at cheaper neighborhoods like others have mentioned-Chelsea, Everett, Lynn, Revere-I personally didn't want to live there but am planning on investing there if all goes to plan!

Ryan Thomson · Answer

Well said @Brady Graham!

Best Boston Suburbs for House Hacking?

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