A Case To Buy A Multifamily in Boston: Live in One Unit, Rent Out The Other(s)
Dear Home Buyer,
We believe that real estate if bought right, is one of the best long-term wealth creators and investment diversification methods available to individuals. Buying a multifamily property has been one great way for many to get their feet wet in the real estate market. For those who are also looking for a way to get out of renting, buying a multifamily can allow you to live in one unit and rent out the others. Many of our clients are doing this in two and three unit multifamily properties.
Boston home owners have generally been quite successful with property value. This is a market where buyers have dwarfed sellers, jobs and population growth have been up, and local research and institutions have been a bedrock. These reasons have provided home price stability and value growth in Boston.
However, this year, due to the pandemic, many renters are leaving the city. We think the Boston real estate market has reached or is reaching an inflection point or dip in multifamily pricing, which can be an opportunity for a multifamily buyer.
Recent Sales & What’s On Market For Multifamily, How Rent Has Been Performing
In Boston, Cambridge, Somerville, Everett, Medford, Malden, Lynn
Source: MLS 9.2.2020
The above is just a subset of Boston area multifamily performance and rentals, but we believe it's generally the same story in other towns as well. It paints a clear picture that multifamily properties are now less sought after than last year and that supply is beginning to build in the Boston area with rental vacancies up and rent rates down.
The biggest contributor is Covid-19, however other contributors are the individuals who are leaving the city to find more enjoyable living environments and those who are buying their own single family or condominium due to current low interest rates. Given Boston’s large student population and the annual rental turnover between August 31st and Sept 1, the shift to online and the many college deferrals have decreased the immediate need for rental housing. Let’s consider all this before an eviction moratorium has been officially lifted and the CDC officially halting all evictions through the (at minimum) end of 2020.
In Nuhom’s opinion, we see the above as an opening for buyers interested in multifamily properties, especially as a simultaneous means of homeownership and rental income. With some properties, we believe you may have leverage in pricing and negotiating terms. Especially given the number of rental vacancies there are on the market in the Boston area, up 3x (189% increase) vs. last year. We feel this story may continue into 2021. However, we do feel that as Boston normalizes, rents will pick back up due to the overall housing shortage.
"Multifamily investment is an excellent way to stop paying rent..."
Multifamily investment is an excellent way to stop paying rent and instead collect it. While around Boston, the property may not cash flow positively on Day 1, if you decide to live in one unit, on a financial basis it will likely beat paying rent. Even more, it would be expected to be a great long-term asset to hold on to.
Multifamily Purchase Calculator
Understanding how to financially prepare yourself for a multifamily purchase comes down to planning. We’ve built a multifamily purchase calculator for you to use here.