Investing in Greater Boston Multi-Families: The Numbers That Matter

Two- and three-family homes are a classic way to build wealth in Greater Boston. Places like Chelsea, Everett, Revere, Lynn, Malden and East Boston have many of them. But a multi-family is a business, not just a house. Before you make an offer, you need to know whether the numbers work. This guide walks you through the key terms, a sample deal, and the Massachusetts costs that surprise many new investors.

The five numbers every investor should know

1. Net Operating Income (NOI)

NOI is the yearly rent you actually collect, minus the costs of running the building. It does not include your mortgage payment. NOI tells you what the property earns on its own.

2. Cap rate

Cap rate = NOI divided by the purchase price. A building with $60,000 of NOI bought for $1,000,000 has a 6% cap rate. It lets you compare buildings quickly, before financing. In high-priced markets like Greater Boston, cap rates tend to be lower than in many other parts of the country, because buyers also expect long-term appreciation.

3. Cash flow

Cash flow = NOI minus your mortgage payments (principal and interest). This is the money left in your pocket each year, before income taxes.

4. Cash-on-cash return

Cash-on-cash = yearly cash flow divided by the total cash you put in (down payment, closing costs and any upfront repairs). If you invest $320,000 and the building puts $12,800 a year in your pocket, your cash-on-cash return is 4%.

5. DSCR (Debt Service Coverage Ratio)

DSCR = the property’s income divided by its debt payments. A DSCR of 1.0 means the rent just covers the loan. Below 1.0 means you are paying out of pocket every month. Lenders use this number to decide how much they will lend.

Financing: conventional loans and DSCR loans

Under Fannie Mae’s eligibility matrix dated April 1, 2026, a standard investment purchase of a 2-4 unit building can go up to 75% loan-to-value. In plain terms, plan on at least 25% down as a non-occupant investor. If you will live in one of the units, the same matrix allows up to 95% on a 2-4 unit principal residence (high-balance loans have lower limits). That is why many of our clients start by living in their first multi-family. Read more in our guide to buying a multi-family to live in.

A DSCR loan is a non-QM (non-qualified mortgage) loan that qualifies you mainly on the property’s rent, not your tax returns or pay stubs. That can help self-employed investors or people who own several properties. Lenders commonly look for a DSCR of 1.25 or higher, some go as low as 1.0, and down payments of 20% to 25% are typical. Rates and fees are usually higher than conventional loans, and some DSCR loans carry prepayment penalties, so compare carefully. See mortgage types for more options.

Real expenses in Greater Boston

New investors often underestimate costs. Build every one of these into your numbers:

• Property taxes. Boston’s FY2026 residential rate is $12.40 per $1,000 of assessed value. Boston and some nearby cities offer a residential exemption only to owner-occupants, so an investor’s bill can be noticeably higher than the owner-occupant next door. Check each city’s rate.
• Insurance. Get a landlord (dwelling fire) policy quote before you sign the Purchase and Sale. Older buildings, knob-and-tube wiring or old roofs can raise the price.
• Water and sewer. In many multi-families the owner pays water and sewer for all units. It is often a large bill, so ask the seller for 12 months of statements.
• Repairs and capital reserves. Budget for both routine repairs and big items such as roofs, boilers, porches and windows.
• Vacancy. Even good buildings have empty months between tenants. Plan for some vacancy every year.
• Management, legal and bookkeeping. Even if you self-manage, your time and professional help have a cost.

A sample deal (for illustration only)

Here is a made-up three-family to show how the math works. These are not market statistics; your numbers will differ.

At a $1,200,000 price, the cap rate is about 5.4% and the DSCR is about 0.90. With 25% down, this building would lose money each year. That does not mean it is a bad property. It means you need a plan: a better price, rents that can rise to market, a lower rate, more cash down, or living in one unit yourself. Try your own numbers with our investor calculator.

The 1% rule and why it rarely fits Boston

The “1% rule” says monthly rent should equal at least 1% of the price. A $1,200,000 building would need $12,000 a month in rent. In Greater Boston, prices are high compared to rents, so many good buildings do not meet it. Use the 1% rule as a quick filter in other markets, but here, rely on NOI, cash flow and DSCR instead.

Value-add: where investors make money

• Bring rents to market as leases end, after updating kitchens, baths or laundry.
• Separate utilities where allowed, so tenants pay their own heat and electricity.
• Cut costs with energy upgrades, better insurance shopping, or fixing water leaks.
• Finish legal space or add units only after checking zoning and permits with the city.

Massachusetts lead law: plan for it

Most Greater Boston multi-families were built before 1978. Under the Massachusetts Lead Law, if a child under 6 lives in a pre-1978 unit, the owner must remove or cover lead paint hazards. You cannot refuse to rent to a family because of lead paint, and owners are held responsible if a child is poisoned. Before renting a pre-1978 unit, you must give tenants the Tenant Lead Law Notification and Certification form.

Deleading costs vary widely. MassLandlords estimates an average of about $6,000 per unit, with some jobs reaching $30,000. Help is available: a state tax credit of up to $3,000 per unit for full compliance (interim control can earn up to $1,000 of that), and Get the Lead Out loans for 1-4 family homes. Ask for any Letter of Compliance before you buy, and order a lead inspection during your inspection period.

Before you buy: a quick checklist

1. Get pre-approved for the right loan type (conventional, FHA for owner-occupants, or DSCR).
2. Collect the rent roll, leases, 12 months of utility bills and the tax bill.
3. Run NOI, cap rate, DSCR and cash-on-cash with real numbers.
4. Inspect the building, including lead, heating systems and the roof.
5. Learn your duties as a landlord in our Massachusetts landlord guide.

How Luis can help

Luis has helped Greater Boston investors buy and sell multi-families for more than 30 years, in English or Spanish. He can pull rent and sales data, help you check a deal, and connect you with lenders and inspectors. Book a free 15-minute call through our investor page.