All Forum Posts by: Brian J Allen

In November 2023, Fannie Mae introduced a new policy allowing owner-occupant loans on 2-4 family homes with just 5% down, a significant change from the previous requirement of a minimum 15% down payment. One might think this would help first-time owner-occupant homebuyers enter the housing market. Unfortunately, it has also served to prop up the housing market just when it was about to slow down.

Before this, the only multifamily low-down payment program available was the FHA loan, which required as little as 3.5% down. One of the key features of the FHA loan was the Self-Sufficiency Test, which helped keep prices in check. This test ensured that 75% of the total monthly rent for the building would cover the mortgage, taxes, and insurance on the property.

For example, consider a three-family property generating $2,000 per floor, totaling $6,000 in rent. The Self-Sufficiency Test would allow 75% of that, or $4,500, to cover monthly expenses. If the property costs $600,000 with a 3.5% down payment at a 7% mortgage rate, along with typical taxes and insurance, the monthly expenses could be around $4,700. In this case, the FHA would not approve the loan, serving as a good check on prices.

However, with the new 5% down Fannie Mae loan, this check and balance is no longer in place. Motivated buyers are now bidding up houses to prices they cannot realistically afford. This has had the dual negative effect of artificially inflating prices and putting buyers in precarious financial positions.

In Worcester, we have seen properties with $6k a month in rent sell for as much as $720k which has directly contributed to a run-up in prices which has priced out most first-time buyers.

While the intention behind the Fannie Mae 5% down program may have been to help first-time homebuyers, it’s essential to consider the broader impact on the housing market and buyer stability. Careful regulation and oversight are needed to ensure that such programs truly benefit those they aim to help without unintended negative consequences.

i am woking on it in Worcester as there are large homes that could be purposed for this.  And Worcester needs housing and leaders look kindly on seniors and any deed restricted housing.  Just looking for investors.

@Lee Sanders, if you are interested in Worcester, I would be glad to help.  I am an agent that does only investments in the area. I now have a full team with property management and contractors in place.  As metioned above the property management is the key.  Had this team been in place I would still have my own property.

Do a Google search for "Boommates" and you'll find references to the Golden Girls TV show and discussions about two significant issues older people face: the high cost of housing and loneliness.

For younger people, we call this "house hacking," where someone buys a house and takes in roommates to help cover the costs. Most hope this is a temporary situation, expecting eventually to have their own spaces for themselves and their families. However, few realize that the high cost of housing and related expenses may bring them back to shared living arrangements in the future.

Is this a good thing for individuals and society? Should it be encouraged or frowned upon?

Consider my own situation: should my mom take in a roommate to help manage costs in her big house? Should she downsize? Unfortunately, factors beyond our control often dictate these decisions. Many older people have equity trapped in their homes or have low mortgage rates that make selling and moving difficult.

I think it’s wonderful that older adults have the option to share their homes. It can provide financial relief and combat loneliness, fostering a sense of community. The concept of "Boommates" would be an effective solution for many facing economic and social challenges.

Sharing housing can benefit individuals and society by making better use of existing homes and creating supportive living environments. It’s worth considering how we can encourage and support these arrangements to improve the quality of life for older adults.

@lee sanders    the key is to have good property management, i had a 2 family I loved and sold it just to get away from the tenants.  You need to start from the beginning thqt there are no deals, They pay they get a nice place that is it

@Asim Ghani thank you for your comment.  I think one of the problems with Worcester is that it is TOO EASY to develop small.   All the mom and pop people just get a lot build two attached homes, live in one for a year and then sell them both, then go do it again.  There aren't very many large parcels left where you can do a development.  And at the same time as you mention the cost is close to the same as Boston and you don't make as much $ as a developer.  So people are just doing infill lots and chopping lots off of existing buildings to find more lots to build something

Let’s start with a few notable facts:

• 26% of all renters in Worcester and 17% of residents citywide don’t own or have access to a private automobile.
• In downtown Worcester, 41% of renters and 38% of all residents don't have access to a private vehicle.
• Buses in Worcester became fare-free in 2020 and are currently slated to remain that way through June 2025.
• It's challenging to charge an electric car if you live on the third floor of a triple-decker and don’t have access to a driveway.

Do people choose not to have cars? Are they unable to afford them? We don’t have definitive answers to these questions. However, what Worcester needs is accessible housing, jobs, and shopping options.

Currently, Worcester offers limited job opportunities and shopping facilities. Residents often have to travel to Millbury or Northborough to access malls, and many commute eastward for higher-paying jobs. While it’s beneficial that the buses are fare-free, job opportunities in Worcester are dwindling due to the dual tax rate on commercial property.

For Worcester to thrive, it’s crucial to develop a balanced ecosystem where residents can live, work, and shop locally. This means attracting businesses that provide jobs within the city and creating more shopping options. Improving public transportation and ensuring it remains accessible and fare-free is a positive step, but it's not enough if residents still need to commute long distances for work or basic amenities.

Investing in local infrastructure, encouraging businesses to set up in Worcester, and providing incentives to attract and retain jobs within the city are essential steps. These measures will not only improve the quality of life for residents but also reduce the dependence on cars, which is particularly important for those without access to private vehicles.

Antonia Noori Farzan recently wrote a wonderful article in the Providence Journal about rooming houses. Though my real estate business focuses on multifamily housing, this topic resonates deeply with me.

I remember talking to my father about why he lived at home after graduating from college in the 1950s. He explained that back then, the options were simple: you either lived at home, got married, or lived in a house owned by someone else. Single men didn’t rent apartments for themselves. Why would they? All they needed was a room and access to a bathroom. You could rent a room in a big house owned by a little old lady or in a rooming house.

When my son was looking for an off-campus apartment, we were fortunate to find him a room in a rooming house in Hyde Park. It was a great transition from the dorm, offering him his own space at a fixed cost.

People often look down on rooming houses, seeing them as a last resort for those without other options. However, it’s time we start recognizing them for what they truly are: an affordable housing option for those who want to live independently on a budget.

Rooming houses provide a vital solution in today's housing market, offering flexibility and affordability. It's essential to consider and appreciate the diversity of housing options available, each serving different needs and lifestyles.

They appear to be labor and materials, at least that would be in the Worcester Market

This may seem like a surprising topic when you think about Worcester. After all, building in Worcester is challenging due to limited land availability. Unlike cities like Phoenix or Las Vegas, where there is ample undeveloped land, Worcester's development must work within existing constraints.

Currently, some of my clients are effectively participating in Build to Rent by default. They purchase properties, rehab, or build with the hope of increasing the value, and then find themselves holding onto these projects and renting them out when they can't find another suitable investment. This isn't always their initial plan, but it often turns out to be a profitable strategy.

Several clients have considered buying condos to rent due to the lower maintenance requirements. However, they quickly realize that condo fees can significantly impact profitability. As a result, many have shifted their focus to purchasing attached single-family homes or fully rehabbed multifamily properties. These options allow them to control expenses better, attract similar tenants, and often achieve higher rents with lower costs.

I believe there is a promising market for purpose-built attached single-family homes for rent in Worcester. There is demand for this type of housing, and buyer-landlords can achieve a decent return on investment with new properties while benefiting from long-term appreciation.

While Worcester may not offer the vast expanses of land seen in other cities, thoughtful development and strategic investment in Build to Rent projects can meet the needs of residents and provide solid returns for investors.