Financing question for Massachusetts Multi-Family Investors

8 Replies

Hi everyone,

I'm new to real estate investing and my local market is Boston, MA (don't even get me started on prices here).

I plan on living in the house and using a residential mortgage. For cash flow purposes, I would like to buy a property with as many units as possible. 

Given how much more advantageous residential mortgage terms are, I would like to stick with one and avoid a commercial loan. 

Some local real estate agents have told me that 4 or more qualifies as commercial in MA, but others have said it's 5 or more like the standard for the rest of the country.

Does anyone have experience in this market that can tell me which it is? 

Thanks for the help!


@Michael Bronson  

Welcome to BP Michael! I recently moved to Boston from the mid-west and prices here are crazy to say the least. I "househacked" my first property as well (in louisville) and the previous two messages are correct. 

4 units is the max that you can get with a residential loan and would be the best financing for what you're trying to do. 

@Michael Bronson   Welcome to BP!  

Before you jump in to MFR investing here, you might want to read up on landlord/tenant laws in MA. They are wildly biased in favor of the tenant.

In fact a "professional tenant" can tie you up for a year without paying a dime in rent.  That said, thousands of landlords do it successfully.

Just educate yourself and proceed with caution.

Michael, I am a hard money lender in MA and the above comments are are correct in that banks consider 1-4 units as "residential" and 5+ units as commercial.  the issue you need to be careful of is that if you plan on trying to use this strategy repetedly for aquiring units with residental mortgages, the banks will catch on sooner than later.  That is how I bought my first few buildings, then I was told the gravy train had left the station and every purchase there after was considered "commercial".  that is when I had to establish some longer term financing solutions which included; hard money / private money lenders, commercial lenders (at banks) and some other creative lending solutions.  Good luck and let me know if I can further assist.  

Appreciate all the responses.

Niyi I agree and that's what I plan to do. I love the idea of house hacking and while prices are a little distorted up here even when factoring in income levels, rents are high which make up for it somewhat. 

Charlie, unfortunately what you're saying is true and I'm well aware of that. I know there is no perfect way to protect against a situation like that, but there are ways to decrease the odds of it happening, such as having buildings delivered vacant. I'll make that a condition on every offer (already lost one because I wouldn't take tenants) so I can put my own people in and screen them myself to avoid past evictions and go for high credit scores. That should at least lower the odds of something like that happening.

Chris- thanks, I'll take advantage of it as long as I can until I'm inevitably forced to go commercial. I'm probably years and multiple homes away from needing someone of your expertise, but that's very good to know. 

If you’re going to have a condition of buildings delivered vacant be prepared to get a lot of rejected offers.  This is a highly competitive market.  An offer requesting the landlord to evict all tenants will likely go right in the trash.