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Here is weird idea one of our family friend came up with. He has his son attending Harvard Uni next year. He suggested that we will jointly buy a condo that his son would use the next few years and then make it a rental later. He mentioned the rents were too expensive / sq.ft. (we are from Texas) Are there any good neighborhoods (near Harvard U) for this. And how much will the houses cost approx. Thanks,
It depends. Condos up here come in two styles - the traditional whole building/complex type of condos and the other is floors of multi-family homes that are individually sold as condos. The latter is actually much more common (and 'affordable' - see the rest of the post) in Cambridge. You probably want a 2 bedroom, as that is the most marketable for rentals (and selling). You are be looking anywhere from $350K-500K+ for such a condo in Cambridge. In fact, I just checked on Zillow - the cheapest 2 bed, 1+ bath condo for sale in Cambridge is $289K (and that is a bit of a distance from Harvard or the Red Line). The 'good news' is that rentals go fast in the city, so you shouldn't have an issue renting it later. But getting the condo and paying the mortgage now - I don't know.
A lot of these older, larger building don't have separate furnaces for their units.. aka heat/hot water is payed within the condo fee. You can pass off that cost to the renter, but they will be much more liberal with their heating when they are not directly paying for it.
Between mortgage, condo fees, and management fees, your profit could be eaten up pretty quickly. Bright side is because the market moves so fast, you won't be responsible to pay the realtor, they will make the renter pay for it.
Something to keep in mind is the by-laws of the condo association (which are usually present even in a two/three family structure). Many will not allow rental units, particularly if you are a remote landlord, as it often brings down property values and can affect re-financing.
I have seen this "model" work beautifully.....though in a much cheaper market (Tallahassee, FL). Guy bought a 90K 4 bedroom house. His two sons lived there, 2 room-mates paid market rent. Rent covered the cost of mtg, insurance, taxes for the year. Kids graduated and dad sold the house for a small (less than 10K) profit. Kids lived for free for 4/5 years.
Now use the same model in Boston condo market and I could see it having a much different outcome unless you could buy the property without the mortgage expense. The monthly carry won't allow for a break even when compared to renting.
Here is weird idea one of our family friend came up with. He has his son attending Harvard Uni next year. He suggested that we will jointly buy a condo that his son would use the next few years and then make it a rental later. He mentioned the rents were too expensive / sq.ft. (we are from Texas) Are there any good neighborhoods (near Harvard U) for this. And how much will the houses cost approx. Thanks,
Umm......something is not right here. Harvard requires that you spend freshman year on campus....in Harvard Yard. Almost EVERY student then goes on to live in the "house system". Almost no student ever lives off-campus at Harvard U. So it's not likely that this kid is going to live in a condo. And why would you want to get involved in real esate with someone else ? Those situations tend not to end well.
Last edited by Brave Stranger; 06-17-2012 at 02:12 PM..
Is the son going to be a grad student rather than an undergrad? I don't know if the school can MAKE freshman live on campus (there are commuter students), but I know that schools strongly encourage it unless the student is living with family off campus. Also, a freshman should live on campus so that they can bond with their peers, etc. It's an important part of the college experience. But anyway, that's not the question.
This doesn't sound like the greatest idea unless you have a child going to school here as well. I agree with City Guy - for investment reasons, it's not a bad idea, but a much, much better idea in a low cost of living area. I know parents who have bought the so-called "kiddie condo" for their kids to live in while they go to school here, but the Harvard Sq. area is very expensive and I wouldn't do it as an (far) out of state investor with no other tie to the area.
I have seen this "model" work beautifully.....though in a much cheaper market (Tallahassee, FL). Guy bought a 90K 4 bedroom house. His two sons lived there, 2 room-mates paid market rent. Rent covered the cost of mtg, insurance, taxes for the year. Kids graduated and dad sold the house for a small (less than 10K) profit. Kids lived for free for 4/5 years.
Now use the same model in Boston condo market and I could see it having a much different outcome unless you could buy the property without the mortgage expense. The monthly carry won't allow for a break even when compared to renting.
Completely agree. A number of my friend's parents did this in DC when I was in school there. They bought in some of the more transitional areas and have made out well, but I just don't see this working in Boston. If you have a good amount of cash on hand it *might* make more sense to buy than have your kid rent for 4 years but I doubt it. Most people I know that own condos but don't live in them are breaking even or a few hundred dollars +/-.
Just wanted to add to this thread that the Cambridge market is extremely hot right now, especially for condos in good condition and location. We have made several offers and gotten outbid each time. Many are going for above asking price. Something to keep in mind.
Also, I didn't see your response to whether the friend's son was an undergrad or grad student, but I would highly recommend he live on campus as an undergrad. It's a really great experience.
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