The Boston real estate market is hot- prices keep rising in 2022, making it intimidating for new investors. However, if you think it’s too complicated, or even impossible, to invest in the city’s thriving multi- family market then think again. In some instances, you may even be able to achieve a lower net monthly payment for a multi-family home in Boston than for a single-family home. Keep in mind, there are a few steps to follow if you want to successfully invest in Boston real estate.
1. First, do the Math
Your first step should be to determine how much you can afford to pay. Depending on the loan product, the down payment can be anywhere from 5% to 30%, or more. Typically on an investor loan (non-owner occupied), lenders are looking for at least a 20% down payment. However, if you’re going to occupy a portion of the property, the down payment could significantly change.
Investing and holding a rental property is a more lucrative long-term strategy and requires less cash on hand, especially if living in the property. Flipping typically requires larger amounts of cash reserves for construction/renovations. If the property needs work before you can rent it or flip it for a profit, you will need to add the estimated renovation cost to your budget and/or look into a construction loan product. Keep in mind that if you’re flipping, you need to account for carrying costs while the property is under construction and for sale. Carrying costs include mortgage payments, insurance, taxes, and utilities. Additional costs could be architect fees, plans, permits, etc.
Terms to Know
This is also the stage where you should familiarize yourself with a few common (but crucial) financial terms such as the following:
Net Operating Income: This is important if you want to rent out the property. Net operating income or NOI is the income that is left after taking the monthly rent and deducting all the regular expenses such as maintenance, utilities, etc.
Positive Cash Flow: If…