By: Demetrios Salpoglou
Boston is a major education hub. It has a total of 35 higher learning institutions including community colleges, regular colleges, and universities. This, coupled by its small-town feel but with all city life perks, makes it one of the best places to live in. We discuss why it’s a better long term goal to own an Investment property rather than look for apartments for rent in Boston. That 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 always is 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. It’s all these same issues mentioned above that 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? Many people buy properties for their children to save money on rent but then 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 kids’ college. Some people have actually purchased properties and sold them four years later than created more of a profit than the cost of four years of college!
Renting does not provide such a safe harbor or opportunities. Renting a property implies having to make monthly payments to the landlord. And as property prices climb, property taxes go up, so nearly all landlords move their rent up to offset the tax increase. Therefore over 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 and more people are moving to cities across the country than ever. This is also true now as it ripples out 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 great investment properties when strategically purchased near great transportation options or high appeal local and unique 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 world wide 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 and have a little left over for your pocket; you are probably in good shape for the long run.
Rents have been steadily climbing in Boston for a very long time now so eventually the profit spread widens in your favor. Therefore it is often better to hurry up and buy real estate rather than rent. While you will most likely pay the same amount in mortgage for the next several years, and Boston rentals 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. If you rent, you 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!
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 Rent vs. Buy in Boston.