Rent or Buy in Massachusetts? A Guide for Homebuyers
Deciding to rent or buy in Massachusetts can be a difficult pain point for many people. For potential first time homebuyers in Massachusetts, it can be a major conundrum. That’s why it is helpful to go over some of the specific thought processes that people go down in order to make this important decision.
Our property services of Boston and greater Massachusetts weighs a lot of the complicated real estate factors that go into both buying and renting property. There are a number of “rules of thumb” that can be a good starting point, even if you often have to then dissect smaller details regarding any one property. Here we will go over a number of the major things to consider when deciding whether to rent or buy in Massachusetts. For potential first time homebuyers in Massachusetts, it could be a lifesaver.
Table of Contents
- Is It a Good Time to Rent or Buy in Massachusetts?
- What is the 5% Rule and How Can It Help You Decide?
- First Time Home Buyer Programs in Massachusetts
- Managing Your Rental Properties With BMG
Is It Good Timing for First Time Homebuyers in MA? Rent or Buy?
The question of whether it’s better to buy or rent real estate in Massachusetts can be complex. As for first time home buyers in Massachusetts, it can be a crazy decision to make. “Do I wait another year?” “Should I start building equity now?” So much to consider.
The state’s real estate market offers unique opportunities and challenges. For instance, buying property in Massachusetts can provide benefits such as long-term appreciation, potential tax deductions, and the stability of fixed mortgage payments in an ever-changing market. It lets you start building equity, which is something most investors suggest doing. However, the high cost of entry and additional financial commitments, such as property taxes and maintenance, may pose challenges for some buyers, particularly in sought-after areas like Boston or Cambridge.
Renting. Well, that is something different. On one hand, it offers some advantages in Massachusetts (as it does elsewhere). Renters often enjoy fewer responsibilities, simplified monthly expenses, and the ability to save more effectively without the burden of property maintenance. However, they may face drawbacks, including increasing rental prices in competitive markets and limited control over their living spaces.
Given the fluctuations in the state’s real estate market, it’s crucial to assess current and future conditions when deciding whether to buy or rent in Massachusetts.
For example, as of October 2024, the Massachusetts housing market has experienced a 3.2% increase in home prices compared to last year The number of homes sold rose by 10.3%, and the number of homes for sale increased by 18.7%. This indicates a more balanced market, offering buyers increased inventory and potential opportunities for negotiation. However, the average home value in Massachusetts is up 5.6% over the past year, and homes are selling quickly. Given these factors, while there are more homes available, the competitive nature of the market and rising prices may make it a challenging time for buyers.
Applying tools like the 5% rule can also help you make an informed decision based on your financial goals and lifestyle needs. If you happen to be a first time homebuyer in Massachusetts, considering all of these things would certainly help before doing down any one path.
What is the 5% Rule and How Can It Help You Decide?
The 5% rule is a useful tool for evaluating whether you are financially prepared to buy a home. But it sounds mysterious, right? It isn’t! It focuses on three key costs that apply to homeowners but not to renters: property taxes, maintenance expenses, and the cost of capital. If you’re a first time home buyer in Massachusetts, it can be a good place to start when thinking about the topic.
While it was originally developed by Ben Felix for the housing market in Canada, the 5% rule is a handy dandy tool that many people use for other markets. It’s not just for the Canadians. We can use for U.S. markets, including Massachusetts. The principle behind it is fairly straightforward. Property taxes typically amount to about 1% of a home’s value annually. Maintenance costs also tend to hover around 1% of the property’s value each year. The largest component, the cost of capital, is usually estimated at 3% of the home’s value, reflecting both the cost of borrowing and the opportunity cost of equity.
Now we get into a little math. Who doesn’t love math? Don’t worry though. It will be quick and painless. When these costs are combined, they represent roughly 5% of the home’s total value annually (1% + 1% + 3%). Now that wasn’t so bad. To apply the rule, simply multiply the property’s value by 5% and divide the result by 12. This calculation gives you a monthly “breakeven” point, helping to clarify whether the cost of owning a home aligns with or is lower than what you would otherwise pay in rent.
If owning appears more affordable than renting, it might be time to consider purchasing a property.
First Time Home Buyers Programs in Massachusetts
If you’re going down this road for the first time, learning about valuable programs that can assist you could be a gamechanger. And they are out there if you look. Here are a few of the available first time home buyer programs in Massachusetts that might make a world of a difference for you.
MassHousing Mortgage Programs
First there is MassHousing, which offers affordable financing options for first-time homebuyers in Massachusetts. If you are an eligible buyer – and you might be – you can access down payment assistance of up to $30,000, which can be combined with MassHousing’s mortgage loans (which can be quite affordable). These programs are available statewide.
ONE Mortgage Program
The ONE Mortgage Program is designed to assist low- and moderate-income first time homebuyers in Massachusetts. Why apply for it? It comes with a 3% down payment requirement, low fixed interest rates, and it eliminates the need for private mortgage insurance (PMI). That means a big monthly savings. The program is offered by over 40 lenders throughout Massachusetts. For those considering whether to rent or buy in Massachusetts, thinking about this or similar assistance programs could make a big difference.
MassDREAMS Grant Program
The MassDREAMS Grant Program is another one. It provides eligible first time homebuyers in Massachusetts with grants of up to $50,000. It can be used toward down payments, closing costs, and even pre-payments. The program aims to make homeownership more accessible by reducing the financial barriers associated with purchasing a home.
Investing? Manage Your Rental Properties With BMG
Determining whether it’s better to buy or rent in Massachusetts can be difficult for those looking for new housing, especially when it comes to first time homebuyers in Massachusetts. It can be stressful. Very stressful. However, looking at the current market and using the 5% rule can help you decide if it’s a good time to buy. Now, if you’re interested in purchasing rental properties, that is a bit different. That said, many of the same considerations apply. Use the rules for real estate and the current market to calculate the profitability of your investment.
If you’re looking for property management, look no further than Bay Property Management Group. We offer comprehensive property services in Boston, Baltimore, Philadelphia, Northern Virginia, Atlanta, and elsewhere. Contact BMG today to learn more about our services.
