25 July
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Rent or Buy? Boston Housing Review for Students & Young Professionals | By Maya Michalewicz

With student housing costs and monthly rental prices through the roof, students (and their parents) may be interested in how to calculate the delta between buying and renting a home. Let’s take a look at the different options that young adults have in Boston to avoid throwing money down the drain!

University Affiliated Living:

Many students at both Northeastern University and Boston University choose to move into apartment-style living once they become upperclassmen. A student looking to rent their own bedroom in a University affiliated apartment for the 2022-2023 school year can expect to pay an average of $19,000 at BU and $15,000 at Northeastern for fall and spring semester combined. If you plan on keeping your housing through the summer months for an internship or other reasons, it will typically cost an additional semester’s worth of housing, resulting in total housing rates as high as $28,500, or $2,375/month.

Renting in the City:

It is important to compare renting an apartment through the university with leasing from a private landlord. 54-56 Burbank Street Unit 6, located near Northeastern and BU, is a two-bedroom apartment that would cost each roommate $1,650/month for a 12 month lease. Finding a rental priced similarly to 54-56 Burbank St Unit 6 is very difficult for many students and young professionals as the demand is so high; this particular apartment received over 40 interested groups.

Comparatively, 127 St Botolph St #9, an ideal apartment for not only students but also graduates and young professionals, is a two-bedroom apartment located on the Back Bay/South End line that has been recently updated. This unit’s monthly rent would be $2,100 for each roommate, substantially higher than the option on Burbank St but easier to secure as a rental because it has been on the market for a longer period of time. 

Now, compare that to purchasing a home:

It is never too early to start exploring the option of buying a home. Let’s look at 234 W Newton St #2, a two-bedroom condo also on the Back Bay/South End line and located just around the corner from the apartment at 127 St Botolph St. 234 W Newton St #2 is listed for $849,000. Notably, it was renovated in 2020, boasts a large private outdoor deck, and includes an off-street parking spot.

After putting 20% of the purchase price into a down payment, one would be left with a $680,000 mortgage. With a 4.5% interest rate on a 30-year mortgage, the monthly cost breakdown would be $3,446 in interest, $230 in condo fees, and about $623 in taxes. The total monthly cost comes to $4,299. So, if you rented the second bedroom to a roommate and accounted for the principal banked, you would only pay about $1,403 a month!

There are benefits to purchasing a home that may not be obvious at first glance. To help pay monthly costs or save up for any potential repairs that arise, you have the option of parking your car on the street and renting the deeded parking space to someone else for around $350 a month, a reasonable price for an off-street parking spot in that area. There are also government tax breaks to consider, such as yearly tax write offs for interest payments up to $10,000. Not to mention the value of the investment itself, as our pricing in Boston has generally increased over time. When it comes time to sell it is also worth noting that if this unit has been occupied by the owner, in this case the student, then you would not pay capital gains taxes on the first $250,000 of gains above your basis (after fees).

All in all, there are many student housing options in Boston with different pros and cons. That being said, renting lacks a return on investment and long-term monetary benefits when compared to buying. While buying a place that you may only be in for four years seems intimidating, you could very well end up working in Boston, going to graduate school, or have the option to keep it as an investment property if you leave. After reviewing the data, if you have the resources, it IS indeed wise to buy!

Does the idea of investing in real estate excite you?

Five apartments at 54-56 Burbank St are for sale  as a package. As discussed, the demand for rental properties close to colleges and universities in Boston is extremely high. Finding good renters would be straightforward for anyone who purchases these units. In fact, Unit 6 has just been rented for 2022-2023 and Unit 1 has received over 40 requests to preview the space and numerous applications.

As the market is shifting, investors have higher expectations for investment property cap rates. The opportunity at 54-56 Burbank St is a great example of a higher cap rate property in a core market. With an asking price of $2.85 million, this property equates to a cap rate just over 5%.