Do you want to buy a Boston condo as your primary home or as an investment?

Last year I wrote an article on renting vs buying in the Boston market.

How have things changed since I wrote this article?

If you look at the numbers, Boston is still a great place to invest. Both the sales and rental market are strong and the interest rates are still at an all time low.

One Particular Example

Not too long ago, we had a 547 square foot condo for sale in Boston’s  Back Bay.
This unit was listed for $339,000 and sold at asking price. This condo was located on a great street and was in excellent condition (although a basement unit.)
With a sales price of $339,000 and 20 % down, this condo was a great investment. Let’s look at the numbers:

Sales price: $339,000
20% down: $67,000
Principal and interest at a rate of 4.125%: $1279.47
Taxes: $3372.14 a year or $281.01 a month
Condo fee: $356.09
Total monthly output: $1916.57
Rented for $2200 a month

Profit of $283.43 each month

So what does this mean as a buyer?

I am hearing from a lot of buyers who want to buy for their future. So they would like an investment property that they can someday live in.
At our home buyer’s class, we always suggest that buying a new home should first and foremost be looked at as a place you are going to live. We are not saying that you should pay more than a place is worth. (Your buyer agent should run a CMA and be able to provide you rental market information as well.) We also coach buyers not to purchase if they think they may be relocating in the near future or if they are unsure of their job.

Boston has shown a steady rate of return and has in fact turned into a seller’s market.

Using the example above, I would guess that buyer would not want to live in a basement apartment No matter how nice. It’s not always easy to match up buying and investing.
Most investors look at the numbers and make sure they work at a return that is pleasing to them. We have a strong sales and rental market in Boston. They want positive cash flow and are betting that, over the long run, Boston prices will continue to increase.
Most home buyers want a place that is in a location they can enjoy and in a condo that is pleasing to them. They know how much they can comfortably afford and work within their budget to find a place that will give them years of happiness. They are also hoping that if they remain in their Boston condo for at least 3-5 years that Boston condo prices will continue to rise. In this sense, home ownership is an investment.