House Hacking in Boston
I am looking to house hack in the greater Boston area by purchasing a two or three-family so we can house hack. My wife and I currently make 300k a year from our corporate jobs, but we would like to get into real estate investing. We have no debt and each of us has a credit score of 780+. I just finished building out my investment property calculator in excel to run the numbers and I have read a few books (Rich Dad Poor Dad, The Book on Rental Property Investing, and Long Distance Real Estate Investing), but I wanted to get insight from people on what is the best strategy for the following questions below:
Where are the best areas to invest closer to the city?
What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)
What is a jumbo loan? Is it a bad or a good thing?
Is now a good time to invest or should we wait a bit longer for prices to drop?
Where is the best place to look to find a mentor?
What other pieces of advice would you give us as we start our journey?
#3 Starting Out Contributor
- Flipper/Rehabber
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#3 Starting Out Contributor
- Flipper/Rehabber
- Pittsburgh
I don't know the Boston market, but I'll tackle a few of these.
-What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)
As little as possible. Save that cash for other things. If you're owner occupying, this gives you more loan options than if you were buying something you weren't going to live in. Talk to loan officers. See what you're eligible for. Compare monthly payments.
-Is now a good time to invest or should we wait a bit longer for prices to drop?
Impossible to answer. Most folks on BP would say that if you find a good deal now, go for it. But, do your own research and see what you think. Go to a REIA in Boston and see what they think. Talk to loan officers in Boston and see what they think. Search on BP for other Boston investors and see what they're doing.
Where is the best place to look to find a mentor?
-Don't "look for a mentor." Just go to REIAs, network like crazy, ask questions, and talk to everyone you can. Talk to agents, talk to loan officers, talk to other investors.
Hey Scott! Awesome to see that you’ve obviously done a lot of mental, emotional, and financial prep work. You’re clearly right on the cusp of pulling the trigger.
Where are the best areas to invest closer to the city?
Depends what you mean “closer to the city”. Neighborhoods like East Boston and Roxbury (not West Roxbury) are kind of mid-way through an investor takeover, so I’d recommend either of those. Almost certainly property values and rents are going to rise faster than the average in the market, and current reputation lags behind the actual quality of the areas. Somerville is also really good, going to be worse cash flow, but a more pleasant area if you’re going to owner occupy one of the units.
What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)
Depends on the financials. If the interest rate you're getting on the loan is lower than the cash on cash rate of return (i.e. you're getting positive leverage) you should put as little down as possible. If the interest rate on the loan is higher than the CoC rate of return (negative leverage) you should put as much down as possible.
What is a jumbo loan? Is it a bad or a good thing?
Just a line of demarcation for a purchase price that is above a certain dollar amount. These days there is not much difference.
Is now a good time to invest or should we wait a bit longer for prices to drop?
Depends on the deal. In the long run, you’ll regret it if you found a good deal but didn’t pull the trigger because you were hoping prices would go down or something like that. If the deal is good, go for it now.
Where is the best place to look to find a mentor?
A mentor is never going to arrive to you pre-packaged as “a mentor”. Start going to groups and meetups where you have something to bring to the table, and where real estate professionals might be. Network like crazy and just let the mentorship evolve naturally.
What other pieces of advice would you give us as we start our journey?
It’s okay to be scared, don’t wait until you’re not scared anymore. It sounds like you’re probably already more prepared than the majority of people when they get into it. You can never know everything upfront, some things you can only learn by going through the experience, messing up, and remembering the lesson.
Hi Scott, a really tough time to house hack given rates and prices but there are still good deals out there to be had. I'd recommend targeting 2-families if using an FHA loan in order to avoid the self-sufficiency test.
The market is also cooling so you could work with your agent to target properties that have been on the market for 30+ days with offers well below asking price. All you need is one seller to bite.
Best of luck and please keep the BP community posted on what you are seeing!
What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments).
I would suggest putting down low down payments and using leverage when buying, especially a househack. It doesn't really do you any good to have a bunch of money tied in a property if you can't use it, so look for 3.5% to 5% options in my opinion. Cashflow won't look as good, but you can keep some of that money in the bank for unexpected repairs.
Is now a good time to invest or should we wait a bit longer for prices to drop?
I don't know Boston specifically, but Essex county MA (North Shore) has already dropped along with NH because the rates are so high buyers can't afford the prices from 6-9 months ago. I'd target properties on the market 30+ days and send out offers to see what kind of responses you get. Seller ON the market right now are typically more motivated than those Off-market, and have already felt the disappointment of nobody taking their asking price. I'd say buy now, as you can Refinance out of a Higher rate, but you can't Refinance out of a high purchase price. Rates will come down eventually.
Where is the best place to look to find a mentor?
REI meetings, Bigger Pockets, your agent, they are everywhere. Just don't ask anybody "will you be my mentor"... Ask questions, act on their advise, ask more questions and you'll have all the mentorship you need.
What other pieces of advice would you give us as we start our journey?
Your first deal won't make you rich, just make sure to take action as getting started is the most important part of this journey. You will gain so much confidence after your first deal you certainly won't want to stop after that.
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Real Estate Agent New Hampshire (#075051) and Massachusetts (#9567686)
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Where are the best areas to invest closer to the city?
Cambridge is an amazing city with one of the lowest taxes in the Commonwealth and can offer an excellent tenant class. Alternatively you can look at secondary markets that still offers T service such as Quincy, Dedham, Malden.
What percentage should we put down? (We expect to have 120k in cash saved up by EOY, not including other investments)
I would put as low as possible to save your funds for renovations (you're unlikely going to find a completely turn key property) and inject value that way.
What is a jumbo loan? Is it a bad or a good thing?
Loan with loan limit that are ABOVE $647,200+ but it will likely adjust next year. These are actually lower than conventional rates at the moment. 4.99% v 5.99%
Is now a good time to invest or should we wait a bit longer for prices to drop?
Start looking at opportunities today, you have to be active on the market to understand inventory. If you stand on the sideline and watch you wont be ready to execute when the moment strikes. Buy when it is right for you and your needs.
Where is the best place to look to find a mentor?
This forum, networking events, people you like and admire (they dont have to operate in the local market). Be careful of hanging out those who share advice and have no assets or experience to back it up, they will quickly contaminate your goals (quicksand syndrome I call it).
What other pieces of advice would you give us as we start our journey?
Look at open houses for areas you like, pinpoint what you and your wife need for your lifestyle, and figure out what you want in the next 2-4 years and go from there. You dont need everything figured out just yet, you have a long journey ahead. I've been investing for about 9 years and my strategies still shifts.
