@Erica S. - welcome! Great question. I would choose option 1. A condo is a single stream of revenue, while a multi-family will be 2+ streams. Also, while home values can go up or down, your P&I will be a fixed payment and your rents should be fixed income (assuming everyone pays and you use 1 yr leases). Rents in Boston tend to go up, not down, even if home values go down! For example: https://www.rentjungle.com/average-rent-in-boston-...
(I have not validated this data nor do I own the site, just did a quick google search)
So relative to purchase prices 1, 2, 4 or 7 years ago, it's definitely not a good time to buy.
That said, you are doing the right thing by seeing what the trade-off would be relative to your current situation. We don't need to know how much you pay now in rent, but let's assume you pay 2,750 a month for a decent North End unit. If you buy a 3 family and rent out two of the units, you may either be cash flow negative or break even at best. Don't make a purchase only counting 2 of the 3 units. Count the 3rd unit as if you were not there!
If you aren't planning to settle down there in the long term and raise a family, you should assume that at some point you will move out and rent it out or sell it. If you end up paying 1,000 a month while you're there, that's still better than paying 2,750 a month and getting nothing for it. of course, repairs may eat away at that margin, so depending on the age of the building, you need to factor in a minimum of 5% for maintenance and 5% for capex. 10% across both may be reasonable for the first 3-5 years if it needs new things like kitchens and baths to be refreshed.
The point is, nobody will be able to give a definite answer because there are so many properties and so many different markets in Boston. Analyze each one and the only thing I'd say is pick a place where you would be okay with living. Not a war zone or an area too far from public transit. This is because if you don't want to live there, why would a responsible tenant want to live there?
If your numbers are cash flow positive assuming all units are rented, it may be a good investment. If you go the FHA route, do remember that you will be paying PMI for the life of the loan, so you will eventually want to refi out into conventional, which means either the value increases due to improvements you make, the market, or paying the difference.
For anyone considering a 1031, you should really work with a Qualified Intermediary before selling the property since they know the process and keep everything legit. If you do one thing wrong, bye bye tax savings, hello huge potential bill.
Another idea for trying to find a property is to drive around a specific area you like where you know home values are in your price range and then send 20-30 hand written letters to the home owners saying you have been looking to buy in that area and if they were considering selling - saves them the broker fee, so you can pay a little below market rate or whatever you're able to negotiate. MLS is a congested with no contingency offers, which is a huge risk for a first time home buyer, and it's always nice to not have to rush to make a deal when working 1:1 with a potential seller.
Best of luck on your search!
