To be a 1st time home-buyer & Investor in Massachusetts 2017
Voila, the direction of this post is summarized in the title. This post is not asking a specific question. Rather, it aims at exposing my current situation which may be familiar to many newcomers.
I wasn't too sure whether to post this here, or in another more appropriate section (such as strategies, diaries, etc), but of course, comments, corrections and and advices are encouraged. Let's get into spicy details.
Note: this post tackles multiple topics at the same time and goes in various directions. The goal is to be describe what it means to be a newcomer in the RE area, in Massachusetts, in 2017, with relatively limited capital but massive ambition.
I have initially started my interaction with the BP forum here, where the goal was to start with a home purchase, typical single family home, renovate it and live there for a few years. The deal didn't last because of a few reasons, mostly related to the ARV given the pretty intensive repairs. Simply said, we make the deal at buy time, and the property was about 25K off. So... back to home search.
My issue is the following: I am torn between
A. investing right away into a 2-family B&H house, to get to live in 1 unit and rent the other for profit
B. getting my first single family home to move away from renting, start building some equity, and keep my mind clear to focus on investing.
Advantages of A: getting right away immersed into the joy of landlording, receiving cashflow income, investing in a liquid multi-family property that may appreciate more than single family...
Advantages of B: cheaper, easier process, less overhead, build equity, more cash available for investing, more choice...
Initially, I wanted to go for the 2-family house, plan A, for all the reasons above. Plus everyone (including here) suggests that this is a better investment long term.
Unfortunately, this is quickly turning to be an extremely challenging goal:
As many of you know, the Boston area is a horribly expensive area for newcomers into the RE area with limited capital (say 100K). Sellers market, inflated prices, housing bubble, unbalanced competition, etc you name it. As a consequence, plan 2 is impossible to implement without a great deal (foreclosure).
Let me give you an example: a relatively decenty 2 family house in Malden MA, valued at 450K, actually takes offers reaching 600K and higher. With a 10% down-payment (FHA loan), the numbers don't work at all for investing enthusiasts.
As a consequence, I developed the following strategy
1. buying a discounted simple family house "kind of close to Boston", up to 300K, no more. Just for me to live in and build equity
2. focus on multi-family rental houses far from Boston for the time being, ex: Worcester.
3. wait for the house crisis to crash the market so we have a chance to make the big bucks by investing closer to Boston.
Did I say house crisis? Hum... The crisis is likely to hit at some point according to the economic numbers. You know that we may already be in recession, and a bull market can only last so long. The market moves in waves, so if it's not a blow-up, it will be at least a downturn, and prices will drop. It just doesn't seem wise for a first time home buyer to risk too much on his/her first purchase (ex: 600K with only 10% down) these days, and the deal is made a buy time, not much sell time.
Ultimately, whether I go with plan A or plan B, I feel that owning "something" to stop paying rent is the required first step, only then we can be 100% onboard investing. As long as one pays rent, the anchor will slowing or prevent the boat from moving far, either physically, psychologically, or both... I'm suspecting this was already discussed in great details in this forum. Feel free to link it.
Despite of my pragmatic resolution toward the single family strategy I outlined above, I am still looking for 2-family deals in the Boston area for up to 500K, despite of not having an established Real Estate business (LLC), limited networking, financing options and overall experience. Gotta start somewhere!