All Forum Posts by: Tyler Munroe

Hey BP Community,

Adding another deal to my thread here - I recently analyzed a 2-family in Wakefield, MA (28 Lake St) for a client and saw a potential 51% ROI through a condo conversion strategy. Unfortunately, someone else got to it before we could move forward, but I wanted to break down the numbers and approach for anyone interested in similar deals.

This property had a unique setup—originally a single-family home in the front with a townhouse-style addition built in 1990. It was an ideal condo conversion candidate since there was only one shared wall, and parking and yard space could be split evenly. The back unit, built in 1990, was in great shape with AC, a new foundation, hardwood floors, and a solid layout. It only needed cosmetic updates. The front unit, which was the original SFH, needed some structural repairs due to settling near a stream, but a structural report was already completed by the seller.

The strategy was a hybrid condo conversion approach. First, renovate and sell the back condo since it needed the least work and was most appealing to buyers. Then, use the proceeds to clear the loan, leaving the front unit owned outright. From there, we would complete the front unit renovations and either keep it as a rental or sell it as a second condo.

Here’s how the numbers looked:

• Purchase Price: $805,000
• Down Payment (20%): $160,000
• Back Unit Renovation Costs: $118,000
• Front Unit Renovation Costs: $140,000
• Total Cash in Deal: $412,000

Projected sale of the back unit was $650,000, which would have paid off the loan, leaving the front unit free and clear. With the front unit valued at $625,000, that would leave $213,000 in equity. Divide that by the total cash invested, and you get an ROI of 51%. However, these numbers could vary depending on loan rates for the invested capital.

This deal required a strong capital position, but it highlights how lucrative condo conversions can be in the Boston area. These types of opportunities still exist, though competition is high.

This is a bit of a high-level analysis so I understand there's some nuances I'm leaving out, but would love to hear thoughts on this and if anyone is finding similar value.

 Sent!

Hi @Jocelyn Coo - welcome to BP! I'm very much involved in the Boston market and can tell you that flipping has gotten extremely competitive. Unless you find a deal off market directly, you're often up against seasoned investors with distinct advantages in funding and experience.

For newer investors, the live in flip may be the best way to gain an edge over pure flippers, as you can usually offer a bit more since you're looking at it from a longer term perspective (2+ years as opposed to flipping it ASAP).

I'd also recommend house hacking a 3-4 unit property and fixing up the units as they turn over. Properties in this range provide enough rental income to potentially cover your entire mortgage, and you can work towards a BRRR as you slowly renovate the units on your own time.

Happy to connect and talk about all your options!

Hi @Benjamin Hernandez! Boston is a challenging area for buy and hold in the current market, but we're starting to see some value in 4 unit properties. If you're looking for cashflow, you may have to consider 3+ unit properties, as traditional 2 families don't seem to fit the bill anymore.

Happy to connect and chat a bit more about your goals.

@Brian J Allen Thanks for posting this, great to hear different perspectives on this issue! Funny, I was advising a friend heading into retirement on your exact same question and we came up with a solution that hasn't been discussed yet. They've lived outside of San Francisco in an extremely HCOL area for the past 30 years. I would estimate they're looking at cap gains in the range of 2-2.5M when they sell, and this is just a traditional SF home. What we decided is to have them rent the space for at least two years (there's no mortgage so this is nice income for them) and then after that make the decision to sell OR 1031 since it's technically an investment property and they've lived in it for 2 out of the last 5 years. It looks like there may be ways to utilize both the primary residence exclusion and a 1031, but we'll talk to a CPA down the road about that (or if anyone here has insight on that please let me know).

 Don't think any value will be destroyed, but rather created. This is a high priced, highly desirable area with a dire need for additional housing. Allowing multi-unit buildings on SF lots only increases the value of that land since it's now the best-and-highest use. There is a question of how much this will change character, though, so that's something we'll have to wait and see about.

 Thanks for clarifying this! I had heard that anecdotally, so it's nice to get some insight from someone directly involved in the process. I hope we see more pro-housing initiatives pick up after Cambridge led the way.

Cambridge, a high priced area neighboring Boston, has just passed some of the most aggressive zoning reform seen in the state, and possibly the country. Summary of the changes are:

Elimination of Single-Family Zoning: The amendment removes zoning districts that previously permitted only single-family or two-family residences. All residential zones now allow multifamily and townhouse residences by-right.

Zoning District Consolidation: Former "Residence A-1, A-2, B, and C" districts have been reclassified under "Residence C-1," which permits multifamily housing.

Increased Housing Density: The amendment removes minimum lot area requirements, minimum lot area per dwelling unit, and lot width restrictions, allowing for denser residential development.

Reduced Yard Setback Requirements: The minimum required setbacks (front, side, and rear yards) for residential properties have been reduced, allowing for more buildable area on lots.

Elimination of Parking Requirements: The amendment removes all minimum parking requirements, reducing the obligation for single-family homeowners to provide off-street parking.

Subdivision Flexibility: The definition of "subdivided lot" has been updated, making it easier for homeowners to subdivide their land for townhouse or multifamily development.

Height and Floor Area Ratio (FAR) Changes: Floor area ratio (FAR) limitations for residential properties have been removed, and height limits have been increased to permit:

Up to four stories in Residence C-1 districts.

Up to six stories for inclusionary housing projects on larger lots.

Anyone who's familiar with Cambridge knows that this is one of the most prestigious, elite, expensive, restrictive areas in the whole state, and for zoning of this magnitude to be passed is truly historic. There will be some massive development pushes in this area which will undoubtedly change the character of some neighborhoods, but also provide much needed housing inventory. My opinion is that these builds will be super high end and expensive, but with affordability guidelines will bring online many income restricted units to add to the mix.

Overall, I think the message is now resonating with public officials that we need SUPPLY over any other approach to address our housing crisis. This was an extremely unpopular measure with the current residents of Cambridge, but change like this is necessary to address the affordability issues that plague our state. If Cambridge can pass this, I'd hope and expect that other Boston-area cities use them as an example and start to adopt similar changes.

I see a lot of newer investors getting into the market thinking flipping houses is easy money. TV shows and social media make it look like a fast track to financial freedom—but in reality, it's a tough game, especially in a market like Boston.

Even if you have a down payment, you're likely using hard money loans at 10-12% interest for the purchase and rehab. That means on a $500K single-family flip with a $200K rehab budget, you're paying $40K-$50K in carrying costs alone. And that's before factoring in competition from seasoned investors who often have the cash reserves to avoid these costs entirely—allowing them to outbid you and still make a solid profit.

If you don’t have significant cash reserves or can’t find a true off-market diamond in the rough, I wouldn’t recommend flipping as your first real estate strategy in Boston. You might get lucky, but chances are, you’ll spend a year or more just trying to find a deal that actually works.

Curious to hear from others—have you successfully flipped in Boston as a newer investor? What strategies have worked for you?