Buying Rental Property In Massachusetts
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Lowell hits a sweet spot for many real estate investors. Comparatively lower home prices offer a low barrier to entry for beginners investing in rental property, along with the assurance of stable rental rates. And Lowell has close proximity to Boston with a commuter rail, along with a revitalized urban center that has a mix of repurposed mills and older homes.
Get Matched With Local Agents Today!Show more.col-1-center td:nth-child(1), .col-1-center th:nth-child(1){text-align:center;} Recommended Reading Looking for a Home Buyer Rebate Read This First Want to learn how to get a home buyer rebate This guide will tell you everything you need to know to save on your home purchase. How to Make an Offer on a House (10 Steps!) Before you buy your dream home, you need to know how to make an offer on a house. Learn how to submit an offer and what happens next! Clever Real Estate Reviews: Is It Legit (2023 Update) Clever matches you with experienced agents and helps you save on realtor fees. Read these Clever Real Estate reviews to learn more! FAQsWhat is the best place to buy rental property in Massachusetts
Lowell is the best place to buy rental property in Massachusetts, followed by Cambridge and Springfield. Learn how population growth, job opportunities, and home values impact rental property investments.
First, finances. Applying for a multi-family home loan is different than for a single-family one. True, your credit score, income, financial standing, down payment, mortgage insurance, and closing costs are still the driving forces. But, there are two other key factors: how many units are in the property (for size and rental income) and will it be owner-occupied. Either way, you should be prepared to gather more documentation and pay a higher interest rate overall. Furthermore, you will have to put down anywhere from 25-35%, especially if you are not planning to live on the property.
Don't count on anticipated rental income to help you qualify for a loan. Conventional lenders evaluate rental property based on income stream, and generally structure a loan on the financial viability of both the property and the lender. If you're a first-time landlord, not all lenders will count potential rental income toward the total income needed to finance your purchase. Lenders like to see a healthy rental history for their investment.
Residential rental property in Massachusetts is a highly regulated business. You can succeed, but you need to be able to read and understand the law. You cannot rely on common sense. Check out MassLandlords.net/laws for details and a reading list.
One member defrayed college costs by buying a multi and renting to their kid, instead of cutting a check to pay for a dorm. Now the rental income keeps them retired comfortably. Another worked for decades nights and weekends to renovate their rooming houses. Finally they got to travel to Africa to see gorillas, and much else, fulfilling a long-term dream. Many with real estate do better than others with only pensions or retirement accounts. It is worth having to plunge toilets.
The rental market is also strong. Approximately 30% of the population rents their homes in the city. The most affordable neighborhoods are Auburndale and West Newton, where renters pay an average of $2,484 per month. The area South of Beacon Street to Route 9 and Upper Falls rents for an average of $3,606 per month. While buying investment property in Newton may cost more than some of the other best places to invest in real estate in Massachusetts, investors could realize significant returns as the market continues to grow.
There are many reasons why buying investment property in Massachusetts is a good idea. The state offers a strong and growing economy and potential investment properties at many different price points. As one of the strongest economies in the country, there are countless towns and cities in Massachusetts where investors can find the perfect investment properties. In this article, we identified 4 that we consider to be the best areas in Massachusetts for real estate investment.
Q: Can I use rental income to qualify for a loanA: Yes, but with some stipulations. You can use both current and projected (future) rental income to qualify for FHA and conventional loans, as long as the income is properly documented and/or appropriately adjusted for market rent rates. When applying for an FHA or conventional loan, you can count 75% of your rental income from a property you already own, or the rent you expect to receive from a future property. This applies to the market rent from both owner-occupied and investment properties.
Real estate investors who have net rental income from a property located in another state need to file a non-resident return and also pay tax to the state the property is located in. The rental income also must be included on the resident state tax return, as well as the federal income tax return.
File a federal tax return using Form 1040, or alternate versions such as Form 1040EZ, 1040A, 1040-SR, or 1040-NR. List all rental income and expenses from the property on Schedule E, including the depreciation expense used to reduce taxable net income, along with any other sources of income.
File a resident state tax return, reporting all of the income earned from the out-of-state rental property, plus any other taxable income such as income from other rental properties and W-2 or self-employment income.
The Texas investor also does not pay tax on income from a rental property located in other states with no state income tax, such as Alaska, Florida, Nevada, South Dakota, Tennessee, Washington, and Wyoming.
Owning rental property in a state with no income tax does not eliminate any potential tax liability. To illustrate, assume that an investor lives in Boston where the flat state income tax rate is 5%, and owns a rental property in Florida where there is no state income tax.
Although the investor would pay no non-resident income tax to Florida, the State of Massachusetts would collect a tax of 5% from any taxable rental income the Florida property generates, because the investor is a resident of Massachusetts.
Some of the potential advantages of remote real estate investing include buying rental property in markets where home prices are more affordable, the population and job market is growing, and local governments are low-tax and pro-business.
However, an investor may not be able to completely avoid paying tax on income from an out-of-state rental property, because taxes are collected based not just on where the property is located, but also where an investor resides.
RealtyTrac reports that February is one of the best times to buy a home, and with mortgage rates continuing to inch up, the perfect time to invest in a second home as a source of rental income could be right now. But buying a second home for investment is a big financial decision that can be intimidating without the proper knowledge. To better prepare you to take the plunge in purchasing a rental property, I have put together some key factors to consider.
Once you have looked at your finances and determined that you can qualify, you should look at the kind of investment property you are looking for. To put this in other words, you need to figure out what kind of rental property you want: long-term or short-term rentals. Long-term rental involves more of a landlord position while short-term would be more like an Airbnb.
After choosing the rental type, you will want to investigate a financial plan that will help you purchase your investment property. The best option is to refinance your primary residence and use the equity to cover the down payment for your new property. 64% of buyers think that the cost of their current home will increase in the next year. Higher value equals more equity which allows you to use your current home better to finance your second one. If this is the route you want to go, you can do a cash-out refinance where you covert the equity from your home into cash, or you can take out a home equity loan that allows you to take out a lump sum loan.
Location seems like an obvious thing to consider, but it is actually vital to purchasing an investment property. You are buying a second home to rent as a form of income. If so, you will want to pick a property that is in a profitable area. Looking at the demand and popular areas to buy helps ensure that you will earn enough in rental income to cover the second mortgage cost. The kind of rental property you want should determine the location you are looking for. For long-term rentals, cities or areas with a higher population are good examples of the right location. For short-term rentals, tourist spots are the recommended location.
A declining population signals that over time the total number of people who can lease your rental home is declining. This is a sign of decreased rental prices and property values. A decreasing site is unable to make the upgrades that would draw moving employers and families to the market. You need to exclude these cities. Much like property appreciation rates, you need to see dependable yearly population increases. Expanding cities are where you will encounter increasing real property market values and durable lease prices.
The price to rent ratio (p/r) is a contrast of median property prices and median rental rates that will indicate how high of a rent the market can tolerate. The price you can demand in a community will limit the amount you are able to pay determined by how long it will take to recoup those funds. The lower rent you can collect the higher the p/r, with a low p/r signalling a stronger rent market.
Typical short-term tenants are tourists, home sellers who are waiting to close on their replacement home, and corporate travelers who prefer a more homey place than hotel accommodation. House sharing platforms such as AirBnB and VRBO have enabled a lot of residential property own