Considered a foot in the door of homeownership, these multifamilies gave owners a place to live and rental income to pay the mortgage. But buyers may have to look beyond Boston to make it work.

Three-deckers lined Rosemont Street in Dorchester in this 2021 photo. Craig F. Walker/Globe staff/File

By Jim Morrison

Three-deckers were once a reliable and well-worn path for working-class, Boston-area families to get into the housing market and build considerable wealth over time. The owner often moved into the first-floor unit of these multifamily homes, and the rents from the upper floors would cover the monthly mortgage.

That was the plan, anyway.

Last year, according to Multiple Listing Service data, the median sales price of a three-decker in Boston was around $1,200,000, and now rents don’t cover the mortgage anymore, said David Bates of William Raveis Real Estate, who specializes in investment properties. He said 159 of the 234 three-family homes sold for more than $1,000,000, and presumably the other 75 needed work.

So where can people of modest means get into a three-decker these days?

“Good three-family homes are in areas that have a little bit of streetscape, density, restaurants, retail, and access to public transportation” he said. “That’s usually the kind of neighborhoods that the highest-selling three-families would be in. And of course access to Boston is a plus.”

But, he said, the median price of a three-decker in once-affordable Malden was $1,200,000 last year. It was the same in Medford. In Arlington it was nearly $1,300,000. In Somerville, it was $1,400,000. No, when Bates says you have to go beyond Boston to find an affordable three-decker, he means way beyond.

“If you look at New Bedford and Fall River, Lawrence and Lowell and Worcester, there wasn’t one three-family that sold for more than $1,000,000 in those markets,” he said. “There may be other cities, too, but these communities are very affordable compared to Boston.”

Each of those communities has or will soon have a commuter rail station, making access to Boston easier. The stations in New Bedford and Fall River are expected to open this summer.

New Bedford/Fall River

New Bedford, pictured here in 2021, is expected to have its own commuter rail station this summer.

Steve Medeiros is leader of the Steve Medeiros Team at Keller Williams. He’s been working with buyers and sellers of multifamily properties on the South Coast for two decades and owns a multifamily property in New Bedford. Medeiros said it’s difficult but still possible to buy a three-decker, live on the first floor, and have the rents from the other two units cover most of or conceivably all of the monthly mortgage payments. Last year, the median sale price of a three-family property in that area was $539,000, according to the MLS.

“It all comes down to the numbers,” he said. “How big is the down payment? What is the purchase price? What are the rents? Does the property need work? Are you going to manage it yourself or hire someone?”

He said a three-bedroom unit will typically rent for less than $2,000 a month in the area, unless it’s in great condition in a desirable neighborhood. There were just 18 three-family properties on the market in the two cities in mid-March, and with so many buyers out there looking, it’s a seller’s market.

Worcester

Owner-occupant buyers are reportedly having a hard time competing with investor buyers in Worcester.

Brian Allen is a real estate agent with WorcesterMulti. He works with investors and traditional home buyers to purchase multifamily properties, including three-deckers. He has even owned a three-decker, calling it one of the best investments he ever made.

He explained that in Boston, multifamily investors make money mainly because of the rapid increase in property values there. In Springfield, the property values don’t rise very quickly, so they make money on rent. He said Worcester is in a “Goldilocks zone,” where investors hope to see an increase in equity over time and produce positive cash flow each month.

But for a buyer who wants to live in the building, things have changed.

“Two or three years ago, a person could come to Worcester and almost live for free if they had a decent down payment,” he said. “And that is now very hard to do in Worcester because we got to a point where the rents hit a ceiling. Market rent for a three-bedroom apartment is about $2,000.”

He said owner-occupant buyers find it difficult to compete with investors in Worcester, especially now that the inventory of properties for sale is so low.

“There are 18 multifamily properties on the market today, and there are only 12 that a normal person with a conventional loan can buy,” he said. “And all but six of them are disasters. Properties come on the market, and they’re gone in one day with multiple offers.”

That leads him to look off-market.

“If a buyer can afford to spend $700,000, I can find them a place in Worcester, and I can find it off-market,” he said. “I literally call the investor owners I know, people who’ve made their money and might be willing to take their gains. If you can’t afford that, you’re probably better off looking in Webster, Southbridge, or Fitchburg.”

Lowell/Lawrence

Lawrence housing is popular for the price and for the city’s location on the commuter rail.

Christian Doherty, broker/owner of Doherty Properties in Lowell, said the former mill city has long been popular with investors, but in recent years he’s seen an influx of owner-occupant buyers. He said higher mortgage interest rates have sidelined investors, and many buyers are people who have sold their single-family home to buy a three-family or done a 1031 exchange, a tax break. These days, he said, 7 out of 8 offers on multifamily properties come from owner-occupants.

“Consider a typical owner-occupant buyer who bought a three-family at the average price of $715,000,” he said. “After they pay all the expenses and rent the top two units at $2,200 apiece, they’re looking at spending $1,500 or $1,400 a month to live there, so it makes sense.”

And if they move out after a year or two into a single-family home, they could rent the first floor and have positive cash flow every month, plus the tax benefits of homeownership. He said that the numbers in Lawrence are very similar and that both communities have stops on the commuter rail for easy access to Boston.

“But anyone participating in the multifamily market should anticipate a competitive environment,” he said.

Jim Morrison can be reached at JamesAndrewMorrison@gmail.com. Follow him on X @jimmorrison617.

To read the article from the website, click here.