Worcester/NH/VT/ME Real Estate Opportunities?

Question

Hi everyone,

I’ve been a BP member for some time, where I’ve read many BP books, listened to most episodes of the podcasts, and established a relationship with a real estate agent who has taken me to a couple open houses.  Still, I’m in a very similar position as when I started (still no first purchase).  I went back to the beginning and re-read the Ultimate Beginners Guide and felt like taking action today by getting involved on these forums.

I want to become financially free through buying and holding small multi-family properties.  I live on the north shore of Boston and don’t quite have enough money saved up for an FHA loan but I’m getting there.  My original plan was to BRRRR/house hack and while I’m not getting away from the idea, I have started to think about getting involved in markets further from where I work/Boston due to the competition, prices, etc.

I’m interested to learn more from those involved in the Worcester, NH/VT/ME markets where these types of properties appear to be much cheaper.  To be clear I wouldn’t be house hacking these and therefore wouldn’t qualify for the traditional FHA loans (i.e. live in it).  I would love to hear about some success/failures from those who are involved in these markets.

In the meantime, I’ll continue to sharpen my search criteria, marketing plan, financing, and overall real estate strategy.

Thank you in advance,

Bill

Michael DeLaMarre · Answer

Hey Bill,

I live in Worcester and work in Cambridge. My wife and I want to do what you described in your post. Earlier this year we were looking at multifamilies closer to Cambridge to make my commute a little easier, but we eventually decided to stay in Worcester since the numbers made more sense (we are closing on a duplex next Friday). We were mainly looking at turnkey properties since we don't have the time/knowledge to manage a rehab, so that also put us at a disadvantage in terms of finding a good deal.

If you are looking to rehab you may still be able to find properties at a decent price in Lynn. It's a little bit of a rough city, but there are good neighborhoods and it is a faster commute to Boston. There is also a lot of development planned along the oceanfront that might benefit nearby neighborhoods and there are plans to open up the GE train station to the public, which would significantly improve commuting into Boston for some Lynn neighborhoods.

I also wouldn't immediately dismiss owner occupancy in Worcester while commuting to Boston. If you get out the door at around 5:15 AM and jump on the mass Pike you can drive to Boston in 50-60 minutes reliably. The return commute is a little worse, but rarely longer than 80 min. I've been doing this for almost a year now. My original plan when I took the job in Cambridge was to move closer, but the commute has kind of grown on me. It will depends heavily on your situation/personality, but it works for me. Getting in to work early has also helped me with my career, which is a plus. I also have an excuse to listen to two full episodes of the biggerpockets podcast every day in the car!

If you are currently renting you could always find a 6 month lease in Worcester to figure out the area and see if the commute will work for you. Funny enough, with the lower rents in Worcester this will also potentially help you save up some more for your down payment. If the commute works you can move forward with an owner occupy/FHA strategy. If it doesn't, you move back to Boston and at least you learned the area so when you do invest you have the knowledge.

Let me know if you want to chat more about my experience and I would be happy to share.

Michael

Michael DeLaMarre · Answer

Ah, yes Worcester might not be the best place for you to commute from!

We were only looking at turnkey properties in Worcester so there was a lot of competition. We went 7% over asking price on a newly remodeled triple decker on our first attempt and still got outbid. The duplex was our second attempt and we also ended up in a bidding situation and paid over asking. Both properties had multiple offers the day they had first showings. My research of sold properties for Worcester indicates the average newly remodeled multi-family is going for between 5% and 10% over asking and is under contract within a week of listing, so I think our experience is pretty typical for the Worcester market. The stock of newly remodeled properties hitting the market has been decreasing each year for a few years now, so it seems like supply can't keep up with demand.

I've seen some properties in Worcester that need significant work sit on the market for a little while, so if you are looking to rehab you may not have as much competition. With the market how it is you may still have limited capacity to negotiate with the seller if you are looking at properties listed on the MLS though, unless they are significantly overpriced to begin with.

See below for some notes I had written for my own purposes when I was researching Lynn. If we are headed for a recession I don't know how that will impact all the development that is planned for Lynn, but you could say that about anywhere.

• 
• 98 Lynnway, Harbor98: 48-60 luxury condos planned. $30-$35 million project broke ground this fall. Completion planned for 2021. Same developer has started construction of luxury condos on Western Ave and has already sold all of them. If all goes well with his initial waterfront properties he plans to build ~550 apartments on the lakefront. This may steer renters from Boston towards lynn.
• 254 Lynnway, North Harbor: $90 million investment to build 332 apartments. Developer is hoping to steer Boston commuters towards more affordable space in Lynn. Includes parks and ocean walkway on shore.
• 626 Lynnway, former Garelick Farms: Future plans to build apartments, retail center, hotel, and restaurants. Currently the site is a factory that sits next to a wastewater treatment plant. Developer is in talks with city over moving the treatment plant to make development possible. Currently, they plan to revitalize the factory and operate it while they hold the property. Developer estimates plans are 3-7 years away.
• 810 Lynnway, Lynnway Mart Indoor Mall & Flea Market: Plans for more condos/apartments/offices. Owner has zoning permits but is trying to sell property. Owner has made public statements indicating he will begin developing the site himself if he hasn't sold in ~4 years.
• 43 Lynnway, former General Electric Co. Gear Works: $500 million dollar proposal to build entire neighborhood centered around train stop that currently only services GE employees. That train stop would be opened up for public use and would allow a new commuting option that is within walking distance of our house. Project currently delayed by 1.5 years due to MTBA taking their time deciding on re-designed train station. Construction to begin as soon as MTBA finishes train station re-design plan.

Good luck with your journey! If you make a trip to Worcester or Cambridge and want to grab coffee or a beer feel free to direct message me on here.

Michael

William McSheffrey · Answer

Michael,

Thanks for taking the time to respond to my post.  I appreciate your insight and willingness to help me along.  I hope the closing goes as planned!  I should be a little more specific.  I currently work in Danvers and rent in Peabody.  Geographically speaking Lynn makes much more sense (and that's great insight into the towns future plans).  My girlfriend lives and works in the city.  Admittedly I'm much further along in my eagerness to invest in real estate (but she'll get there).  I originally ruled against Lynn because I've heard it can be rough (although I haven't spent any time there at all - shame on me).  With your advice, I will look into determining which of the neighborhoods are better than others and check them out.

Worcester appealed to me for a variety of reasons - cheaper prices for multi-families, opportunities for value add/BRRRR properties, potential for growth with the money invested in the new baseball team/surrounding area, etc.  I have some friends who grew up in nearby Shrewsbury and could probably help in identifying good locations - but they aren't necessarily into real estate investing.

In your experience, did you find there was a lot of competition for your property?  If you have the time, I'd be interested in hearing more about what you learned through this process.

Thanks again,

Bill