head ovWe get a LOT of questions from real estate investors in and around Boston, and all over Massachusetts. Not only are we a firm that works with a lot of investor clients, the vast majority of us are investors ourselves. This, alongside our role in representing traditional end-user clients and knowing what they want, gives us a unique perspective on what makes a successful investment. All of us also love talking real estate and are glad to spend time going over specifics of individual goals and strategies.
There are many more, but here are the top five residential investing strategies for both new and experienced investors:
1. House Hacking
This is usually the best choice for someone new to real estate because there are optimal financing options and it's more forgiving than some of the others. Buy a multi-family home, live in one unit (taking advantage of the best rates and lowest down payments as an owner-occupant) and rent the other(s). The rental income can be used to offset the mortgage, allowing the investor to live at a very low cost and benefit from appreciation.
Most people are pretty familiar with this concept thanks to HGTV. The strategy is simple: buy a property that needs work, fix it up and resell it for a profit. In reality, before making the purchase it's important to make sure you know your ARV (after repair value), your construction budget and timeline - and stick to them - to ensure the numbers will work. Always ask your agent about specific upgrades and projects based on a property's location and most likely end user to make sure your choices will translate to a good return on investment.
Buy, Rehab, Rent, Refinance, Repeat: Think of this as a long term flip. Buy an undervalued property in need of repair, renovate it and get it rented out. Now you've increased the property value so you can refinance based on that amount, taking out your capital (and often more) to apply to the next purchase. Repeat and you'll build a cash flowing portfolio without tying up too much personal capital.
4. Short Term Rentals
This has become a lot more popular in recent years since renting a property short term, or as a vacation rental, usually brings in a lot more than it would as a traditional long term rental. Lots of local investors see this as a strategy to use out of state but it can be done here in Massachusetts too, as long as you've been careful about checking local rules and regulations (Boston, for example, doesn't allow short term rentals with very few exceptions) and you've researched the seasonal fluctuations in what your rental will bring in.
5. Long Term Rentals
Traditional long term rentals are another one that most people are familiar with; buy a property and rent it out for more than your expense. In Greater Boston, this is easier said than done and some investors buy rental property for appreciation rather than cash flow. With the right property (and location) though, investors can benefit from both cash flow and future appreciation. It's very important to go over Massachusetts landlord-tenant laws with your attorney - before making a purchase - and use approved paperwork provided by your agent to ensure everything is being done in compliance with state law.
Most successful investors find one or two niches and areas that work well for them and are able to build wealth (we haven't even touched on tax savings) for themselves and their families. We love being part of the process and our clients' success, so if you aren't already working with us, head over to our team page and reach out for a consult.