Cambridge MA Average Property NOI
If you had invested in a rental property in Cambridge 20 years ago, you’d likely be sitting on a pretty valuable piece of real estate at this point. Both average rent and real estate prices have been outpacing the metro average for some time now in Cambridge, and it is now the most expensive suburb to rent an apartment in Metro Boston, surpassing Brookline in 2020.
Even in terms of median sale prices, Cambridge holds the 7th highest median price for single family and the 10th highest condo median sales price. Homes for sale in Cambridge sold at a 1 year median of $1.93M while Cambridge condos sold at a median of $892K during the same time span. With prices like that, you may be fooled into thinking that an investment in Cambridge is not the right choice.
However, if you dive a little deeper into the data, you’ll find that there are actually opportunities for profitable real estate investments in Cambridge for smaller property sizes. Before we get into this, let’s look at how we measure an area’s profitability based on average NOI (Net Operating Income) for Cambridge.
Fenway Apartment Vacancy Rate Sits At .11% After Hitting 17.87% In September 2020
Fenway’s inventory of empty apartments has almost reached zero. According to the most recent Fenway apartment data from Boston Pads, the current vacancy rate sits at .11%, down 90% from its pre-pandemic level in February 2020 (1.01%). Even more astounding is the fact that Fenway’s vacancy rate skyrocketed to an all-time high of 17.87% in September of 2020.
Fenway’s supply disruption and subsequent recovery over the past 2 years can largely be attributed to remote learning. Given its close proximity to the city’s largest universities, Fenway’s apartment rental market is fueled by the demand for off-campus apartments near Boston University and Northeastern. When campuses closed in Fall 2020, the effects on the rental market were devastating.
Allston MA Average Property NOI
NOI In Real Estate Explained | FortuneBuilders
Allston’s housing market is among the most active in Boston by far. Primely situated 10 minutes from downtown and close to most of the area’s largest Universities, housing in Allston is always in high demand. It is a thriving market for off campus housing in Boston, so landlords who rent out apartments in Allston tend to see high turnover coupled with even higher demand.
So it should come as no surprise that Allston is a favorite neighborhood among property investors in Boston. Despite having one of the lowest median condo prices in Boston, the 1 year median sales price for Allston multi family homes ($1.79M) is among the 10 highest in Boston, eclipsing that of Cambridge ($1.76M) and South Boston ($1.51M).
Boston Suburbs With The Worst Average Cap Rates
Generally speaking, Boston’s suburbs have some of the best cap rates among all Boston neighborhoods. Median sale prices tend to be much lower in the outskirts of the city, as they have skyrocketed in the city’s core neighborhoods over the past decade. That being said, some of Boston’s suburbs are every bit as expensive as some of the city’s premium real estate markets.
These suburbs in particular,do not yield the highest cap rates on average. In our cap rate calculation, we take the average rent price times twelve to project yearly revenue. We use the median sales price for each property type as the cap rate denominator.
Boston Suburbs With The Best Cap Rates
If you’re a property investor in Boston, you’re probably aware that cap rates have been super low in the core neighborhoods of the city. Prices for Boston real estate have skyrocketed to absurdity, making it difficult to find profitable investments in the city’s core neighborhoods. Right now, the suburbs are carrying the best average cap rates in the Boston metropolitan area without question. In fact, the top 10 best metro neighborhoods by average cap rate are all located outside of Boston proper.
In order to calculate the average cap rate for a neighborhood, we’re projecting yearly revenue based on the current average rent price in that area multiplied by twelve. We’re using the median sale price for each area and property type as the cap rate denominator.
Based on this math, we can get a rough estimate of what an average cap rate would look like for a neighborhood. Here are the top 4 neighborhoods by average cap rate in Metro Boston:
Where In Boston To Buy Real Estate
Times are tough for first-time buyers in Boston’s highly competitive and expensive real estate market. Home prices are at all-time highs, inventory has remained low, and now with interest rates going up, it may seem that home ownership is slipping further away from reach.
Despite its challenges, the housing market in Boston still provides some areas of opportunity for home buyers. Believe it or not, you can still find houses for under $500K in areas that are not too far from Boston’s core neighborhoods. Here are some of the best places to buy Boston real estate in 2022.
Cambridge YOY Rent Price Change Back in Black
After 18 months of rental supply glut, the Cambridge rental market appears like its back on track. After surpassing Brookline in 2019 as Boston’s most expensive suburb to rent an apartment, rent prices tumbled during the pandemic on account of a surge in apartment vacancies and a drop in occupancy. Now the most recent rental data for Cambridge MA shows that the year-over-year change in Cambridge’s average rent price is back in positive figures, and in March it currently sits at +1.53% compared to 12 months ago.
The average rent price for Cambridge apartments was down year-over-year by -6.58% in May of last year. This was a result of a huge +534.88% year-over-year increase in vacancies that was recorded in March of 2021 in Cambridge. Since remote learning was nixed in March of last year, the market rebounded drastically and absorbed much of the vacant inventory in the months that followed.
Now, the current vacancy rate of 0.95% is closing in on the all-time low of 0.86% recorded in March of 2020, which has reignited landlord confidence. Now the current average rent price of $2,796 in Cambridge marks a 1.53% increase from a year ago. With 5 months to go until vacancies hit their cyclical low point, it looks like apartment occupancy will break records in 2022, which will inevitably push rent prices even higher.
South End Rental Supply Sits At All Time Low
South End’s apartment rental market has emerged from the pandemic stronger than ever. The most recent South End apartment data shows both apartment availability and vacancy rates have surpassed their previous all-time lows. South End is currently sitting on 99.7% occupancy with an availability rate of 2.86%, which is 22.28% lower than its pre-pandemic level in March of 2019.
South End’s vacancy rate hit its all-time low mark in November of 2021, when it dropped to a slim 0.40%. Apartment availability eclipsed its all-time low just two months earlier in September when it fell to 0.87%. That marked a -45.96% drop from the previous all-time low set in October of 2019 before the pandemic began.
Even more impressive is the fact that the vacancy rate for South End apartments typically hits its cyclical low in late August before the pivotal 9/1 leasing date, when most leases begin in Boston. With 5 months remaining until late August, it’s not unthinkable that apartment occupancy will reach 100% before September of this year.
Top Neighborhoods to Find Luxury Apartments in Boston
With all of the new high rise developments built in Boston over the past decade, there have been tens of thousands of new luxury apartments added to Boston’s rental inventory. Still, if you’re searching online for Boston luxury apartments, you will find that many of the listings have inaccurate and/or outdated information.
Property management companies are notorious for not updating their rent pricing and inventory levels. So, when you are looking at listings on various apartment portals, there is a good chance that the price for that apartment may have changed, or worse, that there are no longer any units available for rent in that building.
Still, despite the lack of reliable information, we can still get a good picture of what neighborhoods have the most options to select from overall. The following neighborhoods have the highest inventory of luxury apartment rentals in Boston. And remember, if you’re ever in doubt about the price or availability of a luxury apartment, call the management company directly. They’ll know the correct information right away and can help you spare yourself from the rental runaround.
Fenway Apartment Occupancy Sits At 99.92%
Just three months into 2022, there are barely any vacant apartments in Fenway. That is especially astounding considering that just 18 months ago, Fenway’s rental market was flipped upside down when the vacancy rate climbed to an unprecedented 17.59% as a result of remote learning policies that took effect at local Universities.
In the year that followed, we saw a market recovery unlike anything we’d ever seen. From September 2020 to September 2021, the vacancy rate plummeted from 17.59% to 3.02%, an unprecedented 82.83% drop. The free-fall was far from over, as the vacancy rate continued to fall throughout Q4 2021 and into Q1 of this year. Now the vacancy rate for Fenway apartments sits at 0.14%, the lowest recorded level by far.
Vacancy rate is not the only apartment supply metric in Fenway that has hit all-time lows. The availability rate for apartments in Fenway dropped 47% below its previous all-time low in November of 2021. Fenway apartment availability bottomed out at a paltry 0.72% in December of 2021 before trending back upward at the beginning of the year. Now the availability rate of 6.61% is significantly lower than its pre-pandemic level of 10.69% in March of 2019.
