Getting Started Investing In A High Cost City

If you’ve heard, said or been told any of these statements, keep reading, this is for you!

“It’s impossible to invest in X city, the market is way too expensive.”

“X person is only able to invest because they got in early! It’s too late now.”

“No way could you invest in X city and actually make a return in todays market.”

People said this to us, we said this to ourselves. We get it. But we’re here to tell you, it’s not impossible, it’s actually more than possible. My wife and I began investing in Boston, MA, one of the top 5 most expensive cities in America, in 2017 during one of the hottest periods in the market cycle, especially locally. I don’t say this because we’re “so great and able to do the unthinkable”, actually, for the exact opposite. We’re a regular couple that is able to do this because we’re intentional, set goals, and do everything necessary to ensure we’re able to obtain those goals.

This post is not meant to be about our journey in REI, but more sharing knowledge about getting started investing, especially in a high cost market like Boston, MA.

Define your goals and be ready to make sacrifices for those goals. We knew we wanted to be able to house hack in Boston. Knowing this also forced us to calculate the amount of money we would need in a down payment. We calculated we would need about 50K saved for a downpayment, some reserves and to at least get us started on renovations. (Almost no house under 700K in Boston would be move-in ready AND profitable). When we looked at our income, our lifestyle, and our goal of 50K, we knew the only way we could do this was by living with our parents, and that’s exactly what we did. Our first year out of college as all of our friends were going out and renting nice apartments in the city, we moved into our parents basement and saved every dollar we had. (Mind you my wife was making under 30K a year at this point at a marketing agency). In just about 12 months we looked at our bank accounts, and somehow all the sacrifice didn’t even feel like sacrafice anymore, we had enough money for our first house-hack.

1. Create a budget: If you want to become a real estate investor, you first need to become a personal finance nerd. Learn about budgeting, and execute that budget. The downpayment even for an FHA 3.5% loan will be high, so be prepared. Even after several years of operating off a budget, it’s still amazing looking at bank statements and seeing where all of your money was spent. You hear people say “Ph I’m saving everything I can” or “I’m really pinching pennies.” You’d be surpassed how many of these people don’t even HAVE a monthly budget. It’s one thing to say it, another thing to do it.
2. Network: The famous line of “your network is your net worth” could not be more accurate. This is something we did not do initially, mainly out of feeling like we were imposters. We now know how important this is, and stress it to anyone that will listen!
3. Learn your market: Study all aspects of your local market. Get a feeling for the inventory on the market and how it’s moving. Learn who the big players are in your market including investors, realtors, lenders, and wholesalers. Get to know these folks and learn how they do business. Lastly, make sure you are analyzing deals all the time. This will be crucial as you’ll most likely need to act quickly and knowing a deal vs. a non deal will be very important.
4. Build your team: I put this last because the first 4 steps will be crucial in building your team. If you want to build a strong team, you need to be confident in yourself. The top realtors and lenders in your city will be important adds to your team. These folks will not just work with anyone, so you need to make sure you give them a reason to. Let them know your long-term goals, so they know that you are not a one-and-done client. Show them that you are organized, have done your research, and are looking to take action!

There are many additional steps but these are certainly a few to help you get started. If anyone living in a high cost city is reading this and is doubting themselves, don’t! Please feel free to reach out with any questions or if you just want to chat!