1% Rule in Massachusetts?

Question

Does anyone have any suggestions on where to find 1% rule for buy and hold multi-family (1-4 unit) investment properties in Massachusetts?  I prefer to stay away from lower quality units, neighborhoods, and towns.  I have focused my search mostly south of Boston, but tough to find turnkey properties that meet the 1% rule.  Thanks for any thoughts.

Russell Brazil · Answer

You can't have your cake and eat it to. If you want 1% properties then you likely have to own in areas that have lower quality tenants. The rent/price ratio should also be viewed as indicative of the risk involved with that property. Lower ratio equals lower risk tenant base while a higher ratio equals a higher risk tenant base.

Ryan M. · Answer

@Mike Abramowitz  Another thing to mention to people looking to invest in Somerville is that yes there are a lot of people looking to rent but it's also a lot of work.  When I lived there I was given lower rent as compensation for getting tenants in the condo.  My thought was I'd rather be involved and have someone I like, rather than the first random person the land lord gets a signed contract from.

I lived there for 2-3 years and it was constant turnover in the area as there are many college and young professionals bouncing around.  Some stay for a short semester at a local college, some get a job opportunity out of state, some moved out of the country.  Every year I was looking 2-4 times for new people.

The lease agreement was worthless as far as I was concerned people would sign and bail all the time but paid their rent (I assume as I didn't collect the rent or anything else other than finding a new tenant).  Point being there is a lot of managing when it comes to those areas.

Patrick Wheeler · Answer

@Mike Abramowitz Not yet south of Boston. In that area I'm mostly looking for rehabs and a house hack. The two BRRR deals I have done were in Mattapan and Roxbury.

Always looking to connect! Send me a pm if you would like.

Mike Abramowitz · Answer

@Ryan McEniff to be completely honest, I very much so disagree with that. With a good tenant and a good lease none of this should be a concern. Boston is an amazing city for rentals in the sense that you should never need to worry about a vacancy. If you have 1 month vacant after stabilizing the property you're doing something wrong.

1. Hire a realtor to lease it for you-- they'll do it free of charge to you and every renter in the city expects to pay the broker fee which they'll require. Make sure you hire a qualified broker and do your research on them.

2. Get on the 9/1 lease schedule even if it means lowering the rent for a 5-6 month term (or something random/less than a year/more than a year.) This is when the largest pool turns over... yah if you have 100 units it sucks to deal with but it is just how the city works, don't fight it... work with it.

3. Enforce your lease. As part of the generation that loves to rent I know many many people who rent and not one of them have considered breaking their lease. (with the exception of one issue with bed bugs that the landlord didn't properly handle... but thats a story for another time) When tenants sign a lease they are signing for one year, its not forever, they will let you know 3-4 months prior to the end of the lease that they are looking to renew for another year or move on. If they want to move on they are out 8/31. No exceptions.

4. Don't rent by the room. Its not worth the hassle. Something breaks no one did it, you can't charge utilities, and its multiple leases for one apartment, and realtors typically won't want to deal with one room so you're renting it yourself....no thanks

5. Treat real estate like a business, and if you can't help but be the nice guy/gal hire a PM.

These areas are if anything, the easiest to manage. This is why you see PM companies in boston charging 4-6% of rent no 10% like other areas. (Of course the rent prices help too but... good tenants (with options of tenants) are really what keeps things easy.)

David Cahill · Answer

Yes, Julia Ann, street by street. Dorchester is very complex in that way! There are a ton of great little pockets in there that most people are too afraid to even drive by. They are missing out.

Julia Ann · Answer

Lifelong Bostonian here. Yes, Somerville and East Boston had somewhat bad reputations but nothing like Mattapan and Roxbury. Mattapan especially I think is many decades away from gentrification, if at all. Dorchester is a bit different as it was previously a very wealthy area so has some gorgeous older Victorian homes in certain neighborhoods that are always valuable and some neighborhoods (thinking of Pope's Hill and such) that have never really been that bad anyway. It's one of those were you have to go and see street by street. For Roxbury, maybe the closer you get to the South End border you may have some appreciation.

But yes, 1% rule in MA is very hard to come by, I think you'd have to get a stroke of luck.

David B. · Answer

I see 1% multis  in central Mass in Worcester, Webster etc.

I think that the neighborhoods and property condition can be challenging

Dave P. · Answer

Hi Taylor,

Not all markets allow for 1%. That's just the realty of the situation.  being said, I live and invest in Fitchburg currently, There is a low entry point in Central MA where there are some decent areas. Hope that helps. If you want to speak more please feel free to reach out to me.

Charlie MacPherson · Answer

There are few and far between.  I see a lot of 0.8%.  There's a potential in Brockton right now - I'll message you about it.

1% Rule in Massachusetts?

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