Buying a Two- or Three-Family on the North Shore: How Do You Run the Numbers?

Buying a two- or three-family, living in one unit, and renting the others is often called "house hacking." On the North Shore, in cities like Salem, Lynn, Peabody, and Beverly with a lot of older multifamily housing, it's one of the most common ways people build real wealth from a first purchase.

It's also where I see buyers force an investment story onto a property that doesn't support it. If a deal only works with perfect rent, zero vacancy, and no repairs, it doesn't work.

Here's how I run the numbers.

Why buy a multifamily as an owner-occupant?

• Financing. Owner-occupied two- to four-unit properties can qualify for loan programs with lower down payments than investor loans. FHA, for example, allows as little as 3.5% down for qualified buyers on owner-occupied properties up to four units.
• Rent offsets your cost. The other unit or units help pay the mortgage.
• You're on site. You see problems early and pick your tenants.
• It's the first asset in a portfolio. When you move out, it can become a full rental.

Step 1: What are the realistic rents?

Not the rents in the listing remarks. Not what the seller "could get." What similar units nearby actually rent for, in their current condition.

Also check:

• Current leases: amounts, terms, and end dates.
• Tenants in place: will they stay, and at what rent? (If you're buying with tenants, read this first.)
• Who pays which utilities. Separate meters matter.

Step 2: How will the lender treat that rent?

Many lenders count only part of the expected rent toward your qualifying income, commonly around 75%, to allow for vacancy and expenses. Programs differ, so confirm with your lender before you fall in love with a property.

Step 3: What will it cost to own each month?

Add up:

• Principal and interest
• Property taxes
• Insurance (a multifamily policy costs more than a single-family)
• Mortgage insurance, if any
• Utilities you pay as the owner
• Water and sewer, often the owner's cost in older multifamilies
• A maintenance reserve
• A vacancy reserve

Then subtract conservative rent. The result is your real monthly housing cost as an owner-occupant.

Step 4: Stress-test it

Ask the uncomfortable questions:

1. What if a unit sits empty for two months?
2. What if rent comes in 10% lower than you expect?
3. What if the heating system fails in year one?
4. What if rates are higher when you refinance, if you're planning to?

If the answer to any of these is "I'd be in trouble," either the price or the property is wrong.

Step 5: Check what you're actually buying

• Legal unit count. Is it a legal two- or three-family? Check municipal records.
• Bedroom count. An inspection can change it, and that changes rents.
• Major systems: roof, heating (often one system per unit), electrical service, plumbing, porches.
• Lead paint. Most older multifamilies were built before 1978. Massachusetts law has specific obligations for rentals when children under six live there.

Step 6: Count your cash after closing

Down payment plus closing costs is not the finish line. I don't want anyone closing on a multifamily with nothing left for the first repair. Plan for reserves: an amount you're comfortable leaving untouched for surprises.

What does this look like when it works?

A couple of first-time buyers I worked with did exactly this in Malden: they spent time on the process and the numbers before shopping, bought an owner-occupied multifamily as their first home, and brought in tenants afterward with help on the leases. Here's their story.

Questions people actually ask.

Can you buy a multifamily with FHA in Massachusetts?

Yes, if you'll live in one of the units. FHA allows owner-occupied properties with up to four units, with as little as 3.5% down for qualified buyers. Other rules apply, so talk to your lender.

Does rental income count toward qualifying for a mortgage?

Often partly. Many lenders count a portion of the expected rent, commonly around 75%. The exact rules depend on the program and the property.

Is a two-family a good investment on the North Shore?

It can be, if you buy at the right price and underwrite conservatively. North Shore cities with older housing have steady rental demand, but the numbers on each property decide whether it's a good investment.

What's the biggest mistake multifamily buyers make?

Using best-case numbers: the seller's rents, no vacancy, and no repairs. Stress-test the deal and keep reserves after closing.

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This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.