Hagerstown and Martinsburg

11 Replies

Does anyone have experience investing in the Hagerstown region. Hard to tell if this is an old town that's dying, or if it's the next Baltimore/Washington exurb ready for investment. Seems like prices have risen over the last three for four years, but they really took a beating in the crash. There are apparently still some good deals, but I'm worried this might be the tail end of another, albeit lesser, bubble. Any opinions?

There are a good number of Hagerstown investors on the site, myself included.  I can assure you Hagerstown is NOT the next "Baltimore/Washington exurb".  Hagerstowns economic picture has remained pretty much the same for the past 20 years or so with little to no appreciation.  Hagerstown is attractive to investors due to the low entry price points and high cap rates but understand it is a cash flow only type area.  I see you are from Hawaii, if you are set on investing in Hagerstown I would get something outside of the city limits preferably on the North End and find a trustworthy property management company.  If you do not keep on top of things there are plenty of tenants that will take you for a ride especially if they figure out you are out of state.

As for available deals in Hagerstown, do not fret my friend.  There are plenty of boarded up homes, dilapidated properties, and slum lords to acquire properties from at bargain prices.  The inventory will likely be plentiful for years to come.  
 

Thanks for the quick replay, Andrew. Actually, I'm looking for cash flow more than appreciation, so that part of the story doesn't look so bad. Also, I've just moved back to D.C. from Hawaii, so I'll be able to keep a closer eye on a Hagerstown property. That said, I'm a little concerned about the region's economy. Just drove around the area today, and it looked pretty sleepy, even downtown on a Friday afternoon. Is that normal? I've run old rooming houses before, so I'm used to dealing with deadbeats; I'm more concerned with possible vacancy issues. Do you have any problems keeping units rented? Also, are there 10- or 12-unit multi-families available outside the city limits? 

Thanks for the heads-up!

@Dennis Hollier

If you are local looking for cash flow then this changes the picture for you.  I will say that what you saw today is indicative of the culture and economy I was referring to in my original post.  There just isn't a whole lot there to get excited about.    

In terms of vacancy, you will have no problem getting your units filled.  I have never had an issue finding renters nor have I heard of any landlords having vacancy issues.  There are some mid sized multi units up there but the duplex's and triplex's are very plentiful.  

If you are in DC looking for cash flow I would suggest Frederick.  Its seems to be the best of both worlds in terms of what you are looking for.  Still terrific cash flow, better tenant base, a much better economic picture, and a much higher chance of long term appreciation.  Frederick has a much more happening down town and the night life is actually pretty vibrant.  Plenty of property available at decent entry points.  

@Dennis Hollier @Andrew Michael , I concur with your opinion Andrew, Good cash flow, no appreciation in Hagerstown. I'm okay with that, it just depends what your goals are Dennis. View anything you are interested in prior to purchase. I have made the mistake of submitting an offer of a property sight unseen because the numbers were amazing. I later viewed the property and realized it was not something I wanted to be associated with. Look at what you are you buying, your decision to purchase is incomplete without a walk through. Hagerstown has multiple property management options, but I would not buy if your plan is to be an absentee manager. Managing the manager is necessary, but don't give up your ability to visit your properties because of your geographic location. Hagerstown is not a passive investment. 

Frederick is a considerably less risky play than Hagerstown.

Thanks for the additional info, Ray. Yes, we're mostly looking for cash flow as opposed to appreciation, so Hagerstown may still work. Also, my "day job" is freelance writing, so I may have the flexibility to make regular runs up check on the property and keep tenants on their toes. Of course, I'm not opposed to appreciation. The question for me is, what's the exit strategy? Is it difficult to unload a decent cash-flowing property?

All that said, I'd be delighted to find something that can deliver the same numbers, but closer to home. Earlier, I gave Frederick a desultory search on Loopnet, but didn't see much that worked for me. Any suggestions on particular areas or submarkets?

Hey Russell. If you don't mind, can I give you a call to discuss the market? I can chat tomorrow or Monday. Let me know what works for you. Thanks, Dennis

Hey @Dennis Hollier

I am jealous of anyone able to eke out a living as a wordsmith! Kudos sir!

Look at the days on market on the Hagerstown MLS as well as the sale price versus listed price. Hagerstown is a buy and hold market in my mind. Selling is not a good exit strategy unless your tenants have sufficiently amortized the mortgage to allow you wiggle room in the selling price. Are,you looking at Multifamiliy or SFR?

Hey Ray,

Sorry for the delay responding. Part of that "eking out a living as a wordsmith" I guess.

So, if selling isn't an exit strategy for Hagerstown, what other exit strategies are there? My plan is to buy and hold, but not forever. My plan was to hold it for 5-8 years, then sell and buy a bigger place. Open to suggestions, though. We're looking at multifamily.

Hi @Dennis Hollier ,

I'm guilty of asking you questions before reading the entire thread. I apologize. All of the questions I asked you had already answered.

There is always the option of seller financing. The banks that have loaned me money require an annual personal financial statement as well as annual tax returns. I recognize this as standard business practice and don't see why you can't do the same. Vet your buyer. As long as the property shows a debt coverage ratio of 1.25%, it is attractive to both lenders and buyers. If it is making money it will sell. Hell, I might buy it!

 Here's my scenario. You have owned your small Multifamily for 5 years. Your tenants have amortized the property to the point you have a bit of equity. This is Hagerstown, so their has been no appreciation. You have maintained the property and it is fully occupied. The numbers look great! You have kept the building nice and desirable. Rents are at market. 

You recognize you are competing with multiple property owners for a limited tenant base. Your units, while not over the top, are at least comparable with those at your price point, clean and well maintained.

An opportunity arises for you. You need to cash out and persue the holy grail, whatever that may be for you. The MLS is a slow process. I'm not a real estate agent, but I think the mere mention of 'possible owner financing' brings a tidal wave of offers, good and bad. Vet them. Owner financing comes with a premium. There is a reason the potential buyer cannot obtain conventional financing. Yes there may be increased risk.Default? Regain complete ownership of the asset.

Buy it right. Maintain it. Manage it or hire professional management and ' manage the manager'.

In a nutshell, buy and hold, sell it, or finance it. That's all I can think of.

Hi Ray,

Thanks for sketching that out for me. Actually, that dovetails neatly with my plan. Buy well, maintain properly, and generally be the best landlord at that price point.

The only problem with owner-financing as an exit strategy is that it may not be possible to get much cash out of the property. That would make it difficult to use the existing equity to buy a larger property. 

Ray Arends

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