Cosigners of Boston Students: Rent an Off Campus Apartment vs. Buy an Investment Property
Boston is a major education hub. It has a total of 35 higher learning institutions including community colleges, regular colleges, and universities. This, coupled with its small-town feel and all the perks of city life, makes it one of the best places to live. We discuss why it’s a better long term goal for cosigners to own an investment property rather than look for apartments for rent in Boston. Boston in particular can not only be a winning place for education but also a chance to acquire a great investment property while you put kids through school.
Buying is an Investment
Owning an investment property in Boston is often far better than investing in stocks. Buying a multi-family property or investment condo can provide the tangible benefit of living in it, but also generating appreciation value. Generally speaking, Boston has limited land left to build so construction never seems to keep up with demand. Local neighborhood groups are often against any additional development so this causes less inventory to be available and causes prices to climb. Supply and Demand is always a serious force at play in real estate; and in Boston, demand nearly always wins.
Building new construction takes longer than ever due to stricter building codes and more inspections and safety features than in years past. As product takes longer to make it to the marketplace, it causes prices to climb. The same issues mentioned above also make real estate a much more solid bet on price appreciation and stability. The days of rapid development in cities are in the past. Real estate in Boston generally doesn’t dip much and certainly not as widely as most stocks.
So why not take advantage of low inventory by buying and holding on for the long run? Instead of being lease cosigners, many people buy properties for their children to save money on rent. However, they end up realizing it was often a better investment than they imagined. Many parents realize that after 4 years they ended up with a positive cash flow investment that helped pay for their child’s college tuition. Some people have actually purchased properties, sold them four years later, and created more of a profit than the cost of four years of college!
Cosigners Have Few Opportunities
Renting does not provide such a safe harbor or opportunities. Cosigners realize that renting a property means having to make monthly payments to the landlord. But as property prices climb, property taxes go up. As a result, nearly all landlords raise the rent to offset the tax increases. Therefore, in the long run it makes much more sense to own property in Boston than rent.
Unless Boston somehow magically adds more land to its footprint, the trend clearly points to continued property appreciation. City living and the shared economy are where it is at right now. Nation-wide, more people than ever are moving to cities. This is also rippling away from the core city areas. More and more developers are building nicer properties right on the edge of the city. These properties can also be excellent investments when strategically located near convenient transportation options or unique, high-appeal local businesses and restaurants.
Mortgage Rates Remain Low While Rents Rise Faster than Mortgage Rates Increase
Overall mortgages have become quite stable, especially after the financial crisis in 2008. There are still many opportunities to get long fixed rate mortgages at historically low rates. Even with rates threatening to move up because of a robust economy, there are larger financial underpinnings in the worldwide economy that could possibly keep interest rates low for a longer period of time than most people expect. If you purchase a property today, and your mortgage lets you cover all expenses with a little left over to put in your pocket, you are probably in good shape for the long run.
Rents have been steadily climbing in Boston for a very long time. Eventually the profit spread widens in your favor. Therefore, it is often better to hurry up and buy real estate rather than rent or be a cosigner. While you will most likely pay the same amount in mortgage for the next several years, and Boston rental rates are bound to rise at tight market conditions continue to persist. You also start to build considerably equity in the property the longer you hold onto the investment. So you end up having two powerful positive financial outcomes going in your favor.
You Will Be Able to Customize the Property
If Positive cash flow and building equity doesn’t excite you that much; what about the ability to custom design your own place to meet your needs? It’s almost impossible to find the perfect home in a perfect location that will meet all of your desires. As a homeowner, you could decorate your home or improve it whichever way, as long as you do not violate the homeowner’s association laws or Boston building codes. You can knock down walls for additional rooms, build a patio, or update the fixtures and features within the home to make it energy efficient. In essence, you have more control to optimize your property to live a better life. Renting does not provide that opportunity.
You Will Incur Tax Benefits
Homeowners have the advantage of deducting property taxes and mortgage interest while filing their returns every year. Such tax deductions could help you save a significant amount of money.
It is Cheaper in the End
Despite the high initial cost, owning a home is less expensive than paying rent. Cosigners or renters will be paying the landlord’s mortgage along with some profit. Homes for sale in Boston only require you to pay an initial principal amount and monthly mortgage payments that go towards making the property yours.
You Could Turn Your Property into a Retirement Revenue Stream
You could turn your newly acquired property into a long range planning source of retirement income. There are many mortgages that you can acquire that can be paid off as you hit your retirement years. There is something fantastic about paying off your mortgage and having even more positive cash flow later in life. Investment properties for the most part don’t have to be watched as often as a collection of stocks if you are still playing in the market. You can make a lot more bold decisions about what to do with your property when you don’t have a mortgage. Maybe it is time to completely renovate it and gain even more cash flow. Maybe it’s time to hand it off to a Boston property management company and start traveling the world. The long game of real estate is great indeed!
Cosigners, Perhaps it’s Time You Started Thinking about Investment Properties in Boston
If you are interested in buying a home, please feel free to drop us a line or connect with us. We are happy to help you design a financial program through real estate that puts you in the driver’s seat!
Check out our entire post here on Renting vs. Buying in Boston.