Boston Newbie - the single family versus multi-house-hacking

6 Replies

This is my first post, but I've been scouring the forums learning as much as I can. First thing I have to say is that I think BP is amazing. Listening to the podcast's during my commute each day has been informative and a form of educational stress relief.

I'm originally from Florida, living in Boston (Jamaica Plain area) as a renter for the past 3 years, looking to invest in real estate. 

I've read many of the posts about the difficult/nearly impossible task of house hacking in the central Boston area. I created my own excel model based on one of Brandon's posts and came to the sobering truth that the numbers don't look great when a duplex in JP costs over 600K, but the rents come in around 2k per unit at best. Whereas many people recommend living further out, this isn't feasible for me based on work requirements. 

So, I'm back to thinking about a buy and hold strategy where I live in the condo (or single family if I could find one) and then maybe moving in a year or two.

I ran the numbers today assuming an FHA loan (to minimize my cash outlay) although MassHousing may be a better option that I will look into and this is what I came up with. I would love to get any feedback on my thought process.

If I rented a $2400 apartment, then I would spend $31,200 (including the one month fee, which is absurd) in one year.


Then I ran the numbers of the cost of "ownership" assuming the following

375k purchase price condo/SFR, 5k in improvement, FHA financing, 5% down, 30 year (including 1.75% upfront MIP and 0.8% annual MIP), interest rate of 3.625 (pre-qualified by TD Bank). 0% appreciation, 1.5% property taxes, homeowners insurance of $35/month/$100K home value, 200/month in HOA fees and $3,000 in annual maintenance. I did not account for any potential tax benefits and I did not include utilities because I "assumed" the costs would be similar wherever I live. However, i did take into account equity accrued.

When I ran these numbers, my "return" for year 1 is NEGATIVE 28,000?

So is it worth doing the buy and hold strategy where I may gain $3000 over the renting (NEGATIVE $31,000) in year one? 

Annual MIP on FHA loan is .85% unless you put 10% down, then it is .8%, although not a huge difference there.

Buying a house for only 1 year is not a good investment IMO. You need to hold a house at least 2-3 years to break even on the costs to buy/sell it, so unless you are planning on renting it out after you leave or live there longer then 1 year, they I would not look at buying at those prices you have.

Thanks for the reply. Just to clarify, my goal would be to use the SFR/condo as my primary residence for a year, then rent it out and find a new property to move into. I put the one year scenario because ideally the cost/benefit would improve over time based on the principal to interest ratio in the monthly payments. My strategy would be buy and hold, with intention to rent for a long time.

Ok, in that case what I would recommend is forgot about calculating it as if you lived in and just calculate it as if you were renting it. If it would rent well, then yes you can live in it a year and then just rent it out afterwards. That is how I am doing the calculation for the duplex I am under contract on right now. It will cash flow well when both sides rented, but I all almost have no out of pocket expenses when I 'house hack' and live in 1 side of it.

@Mick Glover Welcome.

Doesn't seem to make enough sense to buy now.

Whoever said to move out further was right.

@Mick Glover  

Welcome to Bigger Pockets. I concur with you that Bigger Pockets is amazing. Bigger Pockets has various resources: ebooks, blogs, forums, podcasts, webinars, colleagues, an awards system, a learn section, informative people in many fields of real estate, and more.

It is nice that you are able to receive dual benefits from the podcast education and stress relief.

I'm not understanding why moving farther out doesn't work now, but it will in a year in ralation to you job. If you would clarify it could help with suggesting options.

                            Enjoy as you prosper.....

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