A Blueprint to House Hack in Boston Lucratively

House hacking in Boston is a great way for those to begin investing in real estate in a growing city. The house hacking concept, for those who are unfamiliar, is pretty straightforward: buy a home with at least two units, live in one unit, and then rent the others. The income from the other unit(s) will help pay down the mortgage, thereby allowing the owner to live for little to nothing at all.

While house hacking is a great strategy, in theory, it can be hard for people to do in certain housing markets – like Boston. In areas like Boston, the price of real estate is often cost-prohibitive, even for those willing to live in older, unrenovated homes.

However, although it might be more challenging to house hack in Boston lucratively, it’s certainly not impossible! This is your guide to successfully house hacking in Boston.

Areas in Boston to House Hack

Most investors would agree that the best areas to house hack in Boston are in neighborhoods that have easy access into the city. This includes both public transit access as well as highway access. For example, anyone who works in Kendall Square may want to look at areas on the Red Line, from Braintree to Alewife. Looking at neighborhoods in the Arlington, Belmont, and Watertown neighborhoods are also attractive for those who drive or even bike to work.

Alternatively, people who work in Downtown Boston might want to consider house hacking in East Boston, Revere, or Malden. These neighborhoods are a quick hop, skip and jump into Boston via the MBTA. Chelsea (accessible via the Silver Line) and Lynn (via the 1A commuter rail) are also very close to downtown Boston and have some affordable house hacking options.
The reason access to Boston and Cambridge is so important is because it will help to maximize the property’s appeal among young professionals, who make up a big portion of the area’s rental base. Neighborhoods that are well located to both the downtown area and that have good access to the Burlington and Waltham employment clusters are also strong options for those who want to house hack in Boston successfully. Those rental units will be appealing to roommates where one works downtown and the other drives to the suburbs.

Types of House Hacks in Boston

Unlike some other areas in the United States, Boston has a tremendous portfolio of multifamily housing. While the costs of this housing might be high, there are many options from which to choose. Here are some of the most popular types of house hacks in Boston:

Two-family homes: Two-families, as they’re known in the Boston area (duplexes in other parts of the country), are the simplest form of house hack in which the owner lives in one unit and rents the other.
Three-family homes: Locally referred to as “triple deckers,” three-family homes are one of the premier options for house hacking in Boston lucratively. The cost of real estate in the Boston area often necessitates income from two additional units in order for the numbers to work when trying to house hack. Triple deckers with two units apiece can generally command some of the highest rents on a square footage basis since these apartments appeal to young families and roommates alike.
Student housing: Boston is known for its colleges and universities. There are tens of thousands of students who flock to off-campus student housing each year. Multifamily properties near college campuses can be especially lucrative. Units with 3+ bedrooms will often draw students who are willing to pay top dollar, per bedroom, for an off-campus apartment in Boston.
Airbnb/Short-Term Rentals: Boston is also a popular destination among travelers, including those visiting for work, leisure, medical treatments at area hospitals, or to visit students attending university. As a result, a popular house hacking strategy in Boston is to put a single room or apartment on Airbnb to rent on a short-term basis. There are increasingly strict rules in the Boston area, which vary from one municipality to the next, so any investor will want to understand the rules before pursuing this house hack – otherwise, they might find themselves subject to steep fines that outweigh the income they earn from the rental.
Parking Spaces: Parking is notoriously hard to come by in the Boston area. Anyone who has an oversized driveway or extra garage spaces will be able to net themselves a few hundred (or even thousand) dollars per year by doing this house hack.

How to Finance a House Hack in Boston

There are three primary ways people finance a house hack in Boston:

FHA financing: Given the Boston area’s pricy real estate, many will opt to use FHA financing. In doing so, they can put down as little as 3.5 percent, which is often all someone can afford when doing their first house hack in Boston. However, FHA financing will usually also come with private mortgage insurance (PMI), which can cost a couple of hundred dollars per month, until the loan is paid down to at least 80 percent loan-to-value, so this is something to factor in when running your numbers on a house hack in Boston.
Conventional financing: In order to avoid PMI, many will use conventional financing when purchasing a house hack in Boston. This requires putting down 20 percent, which is not insignificant when many homes cost $500,000 or more. However, those with capital on hand will benefit from increased cash flow each month if they utilize conventional financing.
Cash: Boston-area real estate is so attractive that many people will get into bidding wars when trying to purchase a house hack. Many of these buyers will gain a competitive advantage by paying for the property with all cash. This is usually only possible if someone is selling another property with substantial equity and/or has support from family to help cover the initial costs. After purchasing the property, the owner can then take out a mortgage on the property to pay people back if need be – paying cash simply allows them to get over the hurdle of actually landing and closing the deal.

How to Find a House Hack in Boston

Finding a property to house hack in Boston is one of the most challenging aspects of house hacking in this area. By the time a property hits the MLS, other investors will be flocking to the property and bidding up the price. There are a few other ways to find a house hack in Boston:

Networking Groups: There are investor-oriented networking groups, such as the Boston House Hacking Meet Up group, that can be a great source for property leads, advice and mentorship alike.
Broker Relationships: Some of the best house hacking opportunities come through realtors who have “pocket” listings – i.e., properties for sale that have not yet been listed publicly on the MLS database. It is important for prospective investors to connect with the top brokers in Boston area servicing the neighborhoods they’re looking in to make the realtors aware that they are interested in buying off-market properties.
Direct Outreach: Many find their first house hack in Boston simply by driving neighborhoods, looking for properties with landscaping that is overgrown or that may otherwise needs improvements, and then reaching out to those owners to inquire as to whether they’d be willing to sell. Properties in need of upkeep are often indicative of absentee landlords who may no longer be interested in owning the property. Another strategy is to do a blanket mailing to homeowners within a certain radius of the area you’re targeting, offering to pay a premium for their home if the owner is willing to sell directly without using a broker. The “premium” is often offset by doing a direct sale – i.e.., not having to pay the 5-6% broker’s commission as the seller typically would during a traditional sales process.

In Conlcusion

House hacking in Boston can be challenging simply because of the lack of inventory and correspondingly high prices of real estate. Yet those who learn to navigate the Boston area real estate market will find that house hacking can be one of the best ways to start investing in property and often, to live for a lower cost than they’d be able to otherwise. The rental market remains strong, with tenants bidding up the price of apartments. Those who can purchase property will find no shortage of renters to help offset their costs, as high as those costs may.

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