Market Risk in Boston – Being ignored??

We all know that the Boston multifamily investment market is red hot and im not surprised we have seen serious cap rate compression across the Metro Boston area over the last year.  Interest rates have remained low and seem to be on a path to remain at or near historic lows for the near future, but some of the recent sales, and particularly one, have shocked even me!  Mission Hill has long been a top investment choice for multifamily owners looking to invest in student housing and if you’re a Boston investor im sure you know all about it.  In the recent past (10 years) the hill has seen tremendous growth in both rents and property values.  Currently, it is not uncommon for high end renovations to obtain $1000+ per bedroom in rent and multifamilys selling in excess of 1.4mm at or around 7.5 cap rate, but that is mostly on the front side of the hill.  The front and back side of Mission Hill have typically been divided by Parker Hill Avenue and had significant variances in prices, buy this brings me to the point of this post and the sale that I thought would never happen!  Earlier this week a very nicely renovated 3 family on Fisher Ave hit the market at a whopping price of 1.4mm.  I was shocked when I saw it come on because it is a huge number for the back side of the hill and I thought to myself;  is the market really that hot, can it sell? Well, the property currently is under agreement and my sources tell me that its not under for the full 1.4, but its pretty close.  Has the back of the hill finally come to equal footing in the investors eye as the front? Time will tell, but from my perspective, its not there yet.  I think that it’s a good long term play, but I would not recommend buying at a sub  6.5 cap (which this went for by my rough calculations).  If you want to buy in Mission Hill, and your wiling to absorb a large market risk, then the back side of the hill is a great place to invest, but look to obtain at a 9 cap or better so that if the rental market does soften, you can lower your rents and sill turn a profit.  If you want to invest in Mission Hill and do not want to absorb a large market risk, then shoot for a 7.5 cap on the front side of the hill in the Calumet Circle area.  Please feel free to reach out for a further explanation and more detailed information on investing in multifamily realestate in Mission Hill. welcome to mission hill

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