I am looking to start my real estate journey by house hacking in Boston’s North Shore market. The problem is that this is a very expensive market. A decent two or three family typically goes for $550,000 - $650,000+ in the Beverly, Salem, Peabody, Lynn area.
My goal is to finance one of these properties with a low down payment FHA loan and live in one of the units. However, after running the numbers on multiple properties, it seems impossible to be able to break even in this scenario.
The only possible situation where I can see breaking even is to buy a three family at the lower price end and rent out a room in the unit that I will be occupying.
I was wondering if anyone has any experience in a similar market, or has any insight on how to maximize my return. Is there a different strategy I should be considering?
Hey @Tyler Palermo ,
Glad to see your interest in REI! I am new to it myself, but i have been house hacking a SFR for a few years now and am trying to break into the multi family market. Recently i posted about debt to income issues in MA with the high cost to entry and got some good feedback about how to finance good deals, feel free to take a look! Without bringing in a business partner or seeking additional/separate loans to cover the rehab, i think one of the best options is to build in sweat equity.
You could search for properties that need substantial rehab, and use a 203k mortgage (either limited, or standard depending on extent of rehab needed) to finance the construction. That way you could hopefully get a property cheaper and only have to come up with cash for the 3.5% down payment! This will help to achieve a good CoCROI, but remember to be careful accurately predicting cash flow, and making sure its worth it due to a higher mortgage with only putting 3.5% down. I just recently found out that FHA 203k's can be used for "cash only offers", as long as the bank owns the property ( in a foreclosure).
A recent webinar i watched that @Brandon Turner hosted, mentioned that a good ROI benchmark will be minimum $100/unit(cash flow) and around 12% CoCROI.
Feel free to reach out to discuss more or get some info on how i started!