Skip to content

Home Boston Real Estate Insights Real Estate Investing

A Few Things to Consider Before Buying a Multi- Family Home in Boston

6 minute read

Did you know that purchasing a multi- family home in Boston is an important step for real estate investors? This holds true whether you’re a first-time home buyer or a seasoned real estate investor that specializes in single family homes. A multi- family home in Boston provides you with the ability to produce more income. That means you’re building your net worth in a faster manner. So how do you know when you’re ready to buy a multi- family home in Boston or surrounding areas? The answer is a simple one.

When you feel excited about the prospect it means you may very well be ready. That being said, it means you’re ready from a responsibility standpoint. However, you also need to make sure that you’re ready from a liability and financial standpoint as well. The bottom line is that you should always conduct a bit of research. That way you can better determine if buying a multi- family home in Boston is the right move for you. Remember that a little due diligence can go a long way. Here are a few things to consider before buying a multi- family home in Boston.

Give Consideration To Living In The Property

If you purchase a multi- family home in Boston with four (4) units or less, you may want to live in one. That way you may qualify for an owner-occupied mortgage with little to zero money down. On the other hand, if you don’t live in the property, you’ll need a non-owner-occupied investor loan. That means usually (not all the time) you’ll need a down payment of 20% or more. If you are purchasing a multi- family home in Boston for $600,000 that equals a down payment of $120,000 or more. In addition, living in one of the units will significantly cut down on your living expenses.

For example, you won’t need to rent an apartment. You won’t need to make a separate mortgage payment on a single-family home. In essence, your tenants are paying the mortgage payment on the multi- family with their monthly rent payments. You may end up living in one of the units for free. Let’s take a look at the following example….

You purchase a multi- family home in Boston that has three units. Your monthly mortgage payment with taxes and insurance is $5,000 per month. You rent unit 1 for $2,500 per month, and unit 2 for $2,500 per month. That means you live in unit 3 for $0 per month. The rent from unit 1 and unit 2 covers your entire monthly mortgage payment.

Buying a multi- family home in Boston may also provide you with the ability to purchase another investment property sooner. This is due to the fact that banks, lending institutions, and mortgage brokers can use the rental income to help qualify you for another investment property.

work with a professional real estate agent

Work With Experienced Real Estate Professionals

Purchasing a multi- family home in Boston can be a bit overwhelming to say the least. There are a lot of pieces to the puzzle. There is also a great deal of things that can go wrong. That’s why you need to work with an experienced agent who specializes in multi- family home purchases. Multi- family purchases can be complicated as rents, leases (if existing) may in place all have to be reviewed. Your agent should be well educated in calculating the potential returns and also the rental market in the specific area you are searching. That way he or she can assist you through the entire progression including the due diligence process. You should also work with an experienced real estate attorney, and lender.

These professionals will help ensure that things go as smoothly as possible. You should also work with a reputable home inspector. He or she will provide you with detailed information about all of the major systems and components of the building.

Ask To See The Paperwork

Keep in mind that when you purchase a multi- family home in Boston it’s ultimately an investment. That means you need to review each and every aspect of the investment from a financial standpoint. Always request a copy of the income and expense statements for the past 3-5 years. You should also request a copy of the current rent rolls, any service contracts, and all other reports. You need to ensure that your expectations of the current operations match the historical data. If it doesn’t, find out why.

You should also get familiar with the vacancy rate in the neighborhood, your agent will also be able to provide information in this area. Speak with the tenants in order to receive honest feedback. You will learn about any potential issues and the building’s condition. Make sure to verify proof of the rental payments along with copies of the current lease agreements. Make sure that all security deposits are transferred accordingly.

Value the Property Correctly

Value The Property Correctly

Did you know that a multi- family home in Boston is more often valued on the income it produces rather than a price per square foot? That means you need to carefully examine the income and expenses. The amount of income that is left over after expenses are paid is called the net operating income. The net operating income is then divided by the purchase price. This is called the capitalization rate. That figure determines the fair market value. On the other hand, a cash-on-cash return is calculated by dividing the income after expenses by the cash you have invested.

Don’t Allow Your Emotions To Dictate Your Decisions

Did you know that many first-time real estate investors fall into the trap of allowing their emotions to influence their decisions? Do not be that person. It’s incredibly exciting to purchase a multi- family home in Boston. This holds especially true if you’re a first-time home buyer or first-time investment property buyer. That being said, you need to ensure that you balance that excitement with a realistic analysis of the property. The bottom line is that if the numbers don’t work, it’s not the right property for you.

Have Cash Reserves On Hand

When you own a multi- family home in Boston there will always be unexpected expenses and events that occur. For example, you may end up with an empty unit for a month or two before renting it to a paying tenant. Your current tenants may not always be on time with the monthly rent. The property may need a major repair that you simply weren’t expecting. That means you need to have some cushion money put away as a rainy-day fund. A good rule of thumb is to have a minimum 2-3 months of mortgage payments put away in savings.

multifamily home in boston

Grow Your Real Estate Portfolio by Buying a Multi- Family Home in Boston

In conclusion, purchasing a multi- family home in Boston is a great way to start you real estate investment portfolio. It’s also a smart way to pay your mortgage if you plan to live in the property. However, you need to be ready to deal with all the situations that arise when you become a property owner and landlord in order to succeed at it. If you have any questions or need help, please contact Boston Pads today. We are your Boston real estate specialists. Our team of dedicated real estate professionals will help you locate and purchase the right multi- family home. Boston Pads will be there for you every step of the way, even after you close on your multi- family home in Boston.

Josue Vargas

Josue Vargas

Published April 29, 2021

Josue Vargas has forged a distinguished career in real estate, commencing as a licensed professional in 2003. Initially specializing in leasing, his journey began with notable success, eventually overseeing a team at Boardwalk Properties that consistently achieved over 1 million dollars in transactions annually.

Transitioning to real estate sales in 2014, Josue's background in leasing provided an invaluable foundation. His profound understanding of Boston's diverse neighborhoods and market dynamics facilitated a seamless shift. Collaborating closely with seasoned agents at NextGen Realty, Josue swiftly emerged as a top-performing agent. Subsequently, he took charge of the office sales team, propelling NextGen Realty to achieve over 100 million dollars in gross sales transactions annually from 2017 to 2021. This continued success solidified the agency's position as a market leader in investment sales within and around Boston, courtesy of a vast investor network.

With over two decades of real estate expertise, Josue adeptly navigates the ever-evolving market, leveraging his insights to guide investors. His approach involves predominantly offline methods, recognized for uncovering off-market properties, coupled with an unwavering work ethic and an insatiable appetite for industry knowledge. Notably, this achievement culminated in a partnership with the esteemed Boston Pads Family and co-ownership of Douglas Paul Real Estate, underscoring Josue's stature and influence in the field.