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 hottest places to live in the country. Each year tens of thousands of college students come to the Greater Boston Area seeking various forms of housing. The demand for Greater Boston apartments is immense. However, many parents overlook the ability to buy an investment property that could provide the opportunity to pay for their kids entire college tuition and beyond if they purchase the right property.
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, generating positive cash flow and also appreciating in value. There are also significant tax advantages found in real estate that are not available to the stock market. Geographically, Boston is a small city and has limited land left to develop. Building and zoning codes are very difficult to navigate and as a result- construction never keeps up with demand.
Local neighborhood groups are often against any additional development which creates hurdles to new product and causes prices to continue to climb. Supply and Demand is always a serious force at play in real estate; and in Boston, demand always wins. Boston is currently sitting on some of the lowest real-time vacancy rates (RTVR) and lowest real-time availability rates (RTAR) in recorded history.
Building new construction takes longer than ever due to stricter building codes and more inspections and safety features than in years past. The new housing stock that we produce is better than ever but it also becomes more increasingly costly as we continue to add more bells, whistles and safety requirements to the building codes. As product takes longer to make it to the marketplace, it causes prices to climb.
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. With all these aforementioned challenges above it might almost seem like finding an investment property in Boston could be an exercise in futility. However, if you are persistent and work with a good real estate professional – you might be able to find a great investment property that has you sitting pretty for years to come. Here is a hint – expand your thinking to the possibility of finding a property that could use some value added rehab to make it stand out and obtain the best rents possible.
So why don’t more parents that send their kids to a university take advantage of buying an investment property and holding on for the long run? Clearly there are tens of thousands of highly qualified buyers coming to Boston every year. Could it be that they just haven’t been educated to the benefits of an investment property close to the college where their son or daughter will attend?
Instead of being just a cosigner on a lease, we are starting to see more parents buy properties for their children to actually save money on rent. Owning an investment property that has multiple bedrooms can often provide housing that is 50% or more cheaper than prevailing dorm costs – all without sharing the same room. Their son or daughter can grab their friends and share a house and start paying down the mortgage for four or more years. Some parents start to realize that buying a multifamily investment property in Greater Boston was a better investment than they had ever 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! We have also seen numerous parents hold onto properties for seven to eight years as their son or daughter continued onto law or business school. After seven years there is often a lot of equity that has been paid into the property never mind that it appreciated in value as rents continued to climb.
Cosigners Have Few Opportunities
Renting does not provide the potential for positive cash flow or upside 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. Never mind the fact that nearly all colleges keep raising their tuitions around 5% per year and that also reflects in their dorm pricing. That is why it makes more sense than ever to buy an investment property in Boston. You can literally have a built in step escalator clause on rent and that is due to the fact that the dorms continuously raise their room and board making the off campus properties look even better.
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 out 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. It makes sense to be open to investment properties that might be a little further from the city but have great transportation options.
Mortgage Rates Have Risen- But So Have Rents.
Rents have been steadily climbing in Boston for a very long time. The recent unfortunate inflation bubble caused in part by our poor national energy policy forced a lot of potential new construction to stop in its tracks. Rents have risen dramatically in many parts of Boston due to higher renovation, insurance and servicing costs. Therefore, it makes even more sense to hurry up and buy real estate rather than rent or be a cosigner. Even with higher interest rates; you are better off buying a property, collecting rents and hoping in the future that rates may dip. The best defense against rising rents is to own an investment property and let the rents go up- period.
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. We have numerous landlords in our real time database that have held properties for over 25 years. 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.
Published September 21, 2023
Demetrios has pulled together the largest apartment leasing team in the Greater Boston Area and is responsible for procuring more apartment rentals than anyone in New England – with over 130k people finding their housing through his services. Demetrios is an avid real estate developer, peak performance trainer, educator, guest lecturer and motivational speaker.