Boston Investment Properties: Opportunities for Investors
If you were to ask anyone in the know about whether it makes sense to invest in real estate in Boston, you'd undoubtedly be greeted with a resounding "yes." Historically, Boston investment properties have been reliable sources of income for investors of all experience levels. Indeed, even if you are fairly new in terms of real estate investing, you should be able to hit the ground running by investing in condos, apartments, multifamily homes, single-family homes and other investment properties around the city.
With all of that being said, you can't rely solely on the excellent real estate investment market. You're also going to need assistance from professionals who know and understand Boston and the local real estate market, and that's what you'll get by working with Boston City Properties. All too often, people hear glowing things about buying income property in the city and assume they need little more that some capital to get the ball rolling. In reality, a lot more needs to be done to ensure a solid rate of return. We can help you identify investment properties in Boston that suit your needs as an investor and that will help you bring in the income you need.
The Benefits of Owning Investment Properties
For the purposes of this section, we're going to assume that you're a relative newcomer to the property investing scene. Perhaps you're on the fence about investing in property. You've probably heard your fair share of horror stories, but here's something to keep in mind: The real estate crisis is over. The market in Boston is thriving. Furthermore, Boston has always been a safe bet for savvy investors. The city enjoys a steady stream of incoming students and young professionals, and they're always looking for places to rent. More importantly, they're willing to pay steep rents to live in desirable parts of the city.
There's no question that investing in Boston investment properties is a wise move, but what about owning income properties in general? What's so advantageous about that? Consider these compelling points:
- Take Advantage of Leverage Appreciation - This is property investing 101: Most investors use financing to buy properties. In most cases, a down payment of 20 to 30 percent is expected, and the rest is financed. Due to high demand, properties throughout the city of Boston tend to appreciate steadily and reliably from one year to the next. What happens, then, is a situation that's precisely the opposite of being "underwater" on a mortgage. Before too long, the equity in your investment far exceeds what you owe, and that's largely due to appreciation. That's a very secure position to be in, and it's what investors strive for. In Boston, this scenario is very likely to play out for you, so you can count on having a nice safety net within a reasonable period of time.
- Enhance Your Return with Tax Write-Offs - The tax benefits of owning investment property are incredible. Regardless of the type of property you buy, where it's located or whether you pay for it in cash or finance it, you can write off a laundry list of things. Some of the most popular and advantageous write-offs are for things like insurance policies, property taxes, professional and legal fees, the cost of maintenance, the cost of repairs, travel expenses, mortgage interest and even credit card charges pertaining to the upkeep of the property. By reducing your overall tax burden, you'll enhance the profitability of your investment. It's truly the gift that keeps on giving!
- Enjoy the Benefits of Rental Income - As long as you are careful about what you pay for your properties and how much you can collect in rent, you should be able to start enjoying a steady stream of rental income right away. Obviously, the rent needs to be high enough to cover the cost of the mortgage. Additionally, you'll need to set aside about 5 percent of the rent you collect for maintenance and another 5 percent for vacancy costs. Whatever is left over can go right into your savings account. In many parts of Boston, you can get away with charging very considerable monthly rents, so odds are you'll be growing your savings account before you know it.
Why Invest in Property in Boston?
If you're new to property investing, hopefully the preceding section convinced you of its benefits. If you're a seasoned investor, though, you're already well aware of the amazing opportunities that property investing brings to the table. Here's the next question: Why should you focus on Boston investment properties? What makes Boston so great?
There is always strong demand for rental units in the city of Boston. That's true for a number of reasons, but the high percentage of college students and young professionals just starting out in their careers is the most obvious one. At any given moment, thousands of people are out there looking for places to live. Not surprisingly, most of them want to live within the Boston city limits. Some have plenty of money to throw around on rent while others have more limited means. Either way, they're all going to ultimately pay rent to someone. Why shouldn't it be you?
Unlike many metropolitan areas, rental units in Boston tend to be leased quickly. Rental properties just don't tend to sit vacant for very long. Obviously, the area of the city and other factors affect how quickly a property will be leased, but generally speaking, you shouldn't have to wait long to find takers. Boston's rental market is incredibly dynamic. Whether you purchase multifamily housing, single-family homes, condos, apartment buildings or other types of rental properties, you can expect to fill them quickly.
Choosing the Right Investment Property
We're making this all sound so easy, right? It certainly can be, but it all hinges on one crucial thing: Choosing the right investment property. As with any city, there are great opportunities and not-so-great ones. What works for one investor may not work for the next. There are many variables to consider. Without being careful, you could end up owning a property that drains your bank account instead of growing it. Boston City Properties can help you identify Boston investment properties that suit your needs and that align with your overall goals. Also, be sure to request a list of recently sold properties in the Boston area to help you understand and price the market better.
Things to consider when scoping out properties include:
- Annual Rent - What kind of annual rent can you expect to collect from your target property? If it's currently being leased, you can find out pretty easily. If not, you'll need to look at comparable properties in the area to arrive at a reasonable and realistic estimate.
- Annual Expenses - Next, you need to estimate and total up the kinds of expenses you'll incur by owning the property in question. These expenses typically include repair and maintenance costs, real estate taxes, homeowner's and landlord's insurance policies and vacancy costs, which typically equal around 5 to 10 percent of the annual rent. Also, if you'll be covering utilities at all, you'll need to add them to the list of expenses too.
- Annual Net Income - Subtract the annual expenses from the annual rent to arrive at this figure.
- Capitalization Rate - The capitalization rate is the rate of return you can expect from owning an investment property. To arrive at this number, you need to divide the net income by the cost of the property. The higher the cap rate, the better your annual return will be. At Boston City Properties, we advise clients to come up with a target cap rate before looking at a single property. You can then divide the calculate net income of a property you like by your target cap rate to figure out how much you should be reasonably willing to pay for it. Ideal cap rates vary based on many factors, but they typically fall somewhere in the 5 to 10 percent range.
Get Started with Investing
People from all over the world invest in Boston real estate. Clearly, the city is a great place for investors of all stripes. Whether you're new to investing and want to start with a safe investment that will start bringing in income right away or if you're an experienced investor who wants to enhance your overall success and generate even more income, you can't go wrong with Boston.
Boston City Properties is Boston's 1031 Exchange experts. Visit our guide to 1031 exchanges for more information.
Success in real estate investing hinges on having the right help and guidance. It all starts with choosing the right property. Even if you were born and raised in Boston, you may not know the fundamentals of what makes an investment property a good bet. The professionals at Boston City Properties do, and we can help you identify investment properties that will help you meet and exceed your goals. We help clients find first-rate Boston investment properties every day, including condos, single-family homes, apartment buildings, multifamily homes and more, so give us a call today!
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