Home Buying in Cambridge>Question Details

Njp, Home Buyer in 02140

Buying a condo as an investment

Asked by Njp, 02140 Sat Jan 16, 2010

Hi. I've been window shopping for a condo in Cambridge, MA. for some time. My problem? As a renter, I have a great & affordable space in a prime location. As a buyer I am willing to compromise, but nothing I've seen has been worth giving up what I have. Yet, my inclination to buy something is strong due to the fact that as a single buyer I have felt priced out of the market for many years leaving me to feel that this may be my only oppty to buy in Camb. As a result, I've been thinking about buying something simply as a rental prop. Does this make much sense to do? What approaches would differ in purchasing a condo as an investment vs.a personal residence? Thx in advance, Njp

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6
Hi there,
Good question. Most people in real estate will tell you to buy. There are many good reasons for this:

1) Good loan packages geared towards first time home buyers.
2) Cambridge real estate is amongst the most stable (price and value-wise)
3) American dream.... yada yada.

If you have a great great deal as a rental, your cash flow situation may be so good that buying seems like a bad idea. And this may be TRUE!! You have to gauge this for yourself, but keep this in mind. Even if you end up selling a place for the same price that you bought it.... you will be better off (cash flow) in the end.

Good luck!

Bill P
0 votes Thank Flag Link Sat Jul 31, 2010
If it helps at all ....you are not alone especially in Cambridge & the greater Boston area. I coach many first-time buyers facing the same challenge.

First, check with your mortgage consultant to be sure this is an option that makes sense for your overall financial picture. Stringent requirements by Lenders for Condominium purchases may not be ideal for renting your primary residence and renting out / leasing your investment property (and check with your tax advisor as well for differences in tax benefits).

Second, talk to Realtors® who will represent you as a Buyer Agent - representing your best interests not the Seller. This is an excellent interview question because you will learn much about how the Agent works from their approach.

Third, if you see a Condo for sale that interests you, ask for a Buy vs. Rent analysis. I provide this to potential buyers for all properties I market - this is a great tool to show in bottom-line $ whether a specific property will yield the level of return you're hoping for as an investor - today or in the future.

Finally, consider using our uniquely strong real estate market in Cambridge to your long-term advantage - talk to real estate investors and learn how their patience has paid off. You may not be able to purchase today exactly what you currently rent ; but are you willing to make the investment for the future so that you can? Consider buying your first condo to get into the market now, to build equity and in a few years you just might be able to sell that first Condo and buy up! Be sure to hire a local real estate team that will represent your best interests and help you find a great investment.

If you have not been a Landlord in Mass. before, I recomend consulting with a real estate attorney to fully understand your rigths as a Landlord as well as the rights of Tenants as these differ in every state and there may be city/town ordinances as well.

Hope this helps!
Tamela Roche, Realtor®
Coldwell Banker Residential Brokerage - Cambridge MA
http://www.cambridgeagents.com
0 votes Thank Flag Link Mon Jul 5, 2010
Home buyer:

Welcome to Boston and the catch 22 of living here. We live in one of the few residential markets in the country where there is a huge difference between renting and owning. If you have a great deal on a place where you really like living then rather than sacrifice your quality of life find other areas to invest in. Maybe you can put more in your 401K or IRA? If you want to buy an investment property maybe you want to go further west like Framingham and buy a multi-family so you can collect several rents. If you want to do no work then shoot to the Acton area and buy a small condo and rent that out. Buying a condo in Cambridge as an investment is going to take like 40% down to cash flow unless your buying for the depreciation and tax right off. Best
0 votes Thank Flag Link Mon Jan 18, 2010
There are better places to invest your money than the option you are looking at right now. Knowing the market you will have a tough time getting the rent to cover the mortgage unless you have over 30% downpayment. You are better off looking at a two family where you can live in one unit while earning income from the other.

Being a landlord is not all it is cracked up to be so talk to some of your friens who are to learn the risks, read up, and enjoy your rental status.
Web Reference: http://www.robertmbyrne.com
0 votes Thank Flag Link Sun Jan 17, 2010
If you intend to purchase an income property, then you probably should avoid any properties that are in HOAs (condos, some THs and SFHs, coops, etc), because some have covenants that will restrict you renting your unit(s), and some need to raise their fees/assessments for the paying members to cover the costs accrued by the non-paying ones.
0 votes Thank Flag Link Sat Jan 16, 2010
You must run your numbers to see if you will run a positive cash flow and certainly allow for a period when the unit may not be rented.
0 votes Thank Flag Link Sat Jan 16, 2010
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