Investing in real estate can be highly profitable but also comes with risks. Massachusetts provides ample opportunities for real estate investments with its strong job market centered around education, healthcare, and technology in metro areas like Boston. However, high property prices in parts of MA can make it difficult to find cash flow positive investments. This article explores tips for investing in MA real estate, including favorable cities and property types, potential returns, risks, and property management considerations.
Focus on cash flow positive properties in metro Boston and surrounding areas
The Boston metro area offers some of the best opportunities for real estate investing in Massachusetts thanks to its strong job market and rising population. However, the extremely high median home prices of $600K+ make most properties cash flow negative. Savvy investors should target more affordable areas within commuting distance of Boston, such as Worcester County and parts of Middlesex County. Multi-family properties with 3-20 units often provide better cash on cash returns. College towns like Amherst and Wellesley also present opportunities for student housing and single-family rentals.
Look for vacation rentals and rentals near colleges in Western MA
Western Massachusetts has a weaker job market but offers affordable properties suitable as vacation rentals in the Berkshires region. Investors can find seasonal properties to rent out to weekenders and leaf peepers. The Five College area around Northampton and Amherst provides robust demand for off-campus student housing. Leverage the large student population with properties offering single or multi-bedroom units. Proximity to campuses is key along with amenities like laundry.
Target manufacturing and port cities with solid tenant demand
Massachusetts cities like Lowell, Springfield, New Bedford, and Worcester have historically relied on manufacturing and shipping industries. Although these industries have declined, these cities still offer affordable properties with decent tenant demand. Focus on multi-family and single-family rentals close to major employers. Thorough tenant screening is important to minimize risks in cities with mixed economies.
Expect returns of 8-12% on average for long-term investments
The average cap rate for investment properties in Massachusetts ranges from 4-8%, lower than many other parts of the country. However, the state’s strong economy and rising rents, especially around Boston, allow for long-term appreciation. Investors can realistically target 8-12% average annual returns on MA real estate investments over 5-10 years. Returns depend heavily on the property type, location, and management.
Hire a property manager to handle maintenance, tenants, and regulations
Managing rental properties in Massachusetts as an out-of-state investor can be challenging. Complex building codes, landlord-tenant laws, and taxes make property management best left to the professionals. Look for an experienced local property management firm to handle maintenance, tenant screening and relations, rent collection, licensing, and regulatory compliance. Expect to pay 8-12% of gross rent to the property manager.
Massachusetts offers great opportunities for real estate investing if investors target the right property types and markets. Focus on cash-flowing properties in metro Boston areas and college towns for stability. Hire professional property managers to handle the local intricacies. Realistic returns of 8-12% are achievable on average.