Baltimore area investing

6 Replies

Hey there!

New to BP and to Real Estate investing but was looking to move into Baltimore, MD and start my journey with a house hack.

My plan is to move once my lease is up at the start of 2021 and buy a single family home and rent out the remaining rooms.

My long term goal is to get into section 8 housing to help others (primary goal) while still getting a good return (benefit of primary goal), but that's or much later down the road since I still need my first property!

I was looking for some insight into the general Baltimore market, I'm since I will be living in the house I was targeting more recent college graduate neighborhoods such as federal hill or canton.

After doing some more research on the area I have found some information saying how the population growth of Baltimore is negative while the state is positive, and the population is the lowest it's been in about a century. This along with low rents ~2100-200 for a 3bd 3ba, makes me a little hesitant to invest here.

Even if I didn't invest I think I would still move since the rents are cheap. But I really would like to purchase a property and start building equity.

My main reason for posting is to create a paper trail of "hey I'm actually starting this", but I also wanted to see if I could connect with any other investors in the Baltimore area and talk more about the market and what to be aware of (especially since a majority of these homes were built in 1880-1900)

Thanks in advance, and I look forward to being more involved in both the BP and Baltimore community in the future!

Hey Sam, welcome to BP! 

Househacking and Section 8 rentals are a great way to go. Househacking in Baltimore is how I got started (suburb of Towson) and now I do Section 8 as well. Joining a local REIA (such as Baltimore REIA) is a great way to meet other folks who are involved in real estate in your area. While there are online events now, BP is a great place to connect with likeminded people and also meet someone for a drink or coffee.

Househacking is definitely the way to go to get started... granted I was always told by mentors of mine that living in a property is ideal before going through with a non-owner occupied investment. Ideally you can purchase a property with as little as 3-5% down, and ask for 3% back from the seller. You live here, and rent room by room and cover the mortgage and more.

Think of your first real estate deal as the most crucial stepping stone. Step forward and land safely, you'll be more willing to jump to the next more advanced step, say a Section 8 rental.

So for the perfect househack, where can you see yourself living and having roommates? Federal Hill, Canton, and Fells Point are great areas. While Fed Hill is suitable for the fresh-out-of-college crowd, there are some other parts of Baltimore City such as Druid Hill Park which are becoming 'up and up'. Generally speaking, (especially in suburbs) I typically recommend a location that is within half a mile of a public university, private university, hospital or hospital system, and major company headquarters. This helps assure you will attract young 20 or 30 somethings who wouldn't mind a shared environment. Canton shouldn't be any issue with the large amount of young folks with new jobs, and folks in their mid to late 20s shifting from the younger Fed Hill crowd.

As for selecting a townhome in Canton or other areas of Baltimore City, properties tend to have been built in the ballpark of 1915-1925. In this case, make sure you select a home inspector with great attention to detail, and who can locate potential foundation and/or water issues. 

I have friends who househack in the city - the best ratio of bed/bath I've found is 4 bedrooms with 4+ baths and a basement that isn't considered a bedroom. Your total mortgage payment could be in the ballpark of $2000 - $2300 and you could command rents of about $700-900 per bedroom.

If you have any questions, feel free to reach out.

Updated 3 days ago

Edit: Baltimore City tax, PMI, Insurance; bundled mortgage $2400-2600

Hi Sam!

I live (since 1998) and sell real estate (since 1999) in Baltimore City. I work in the surrounding counties, too, so I see the migration that's taking place. It's true that we are losing population to the counties, mainly because the property tax rate in the city is double the rate on the other side of the city/county line, but also because of crime. There is hope that the crime rate will drop with a new mayor taking over, since he has pledged to keep our police commissioner. (We've been through 4 commissioners in the past few years, and that's not been helpful.) I know we have our issues as a city, but I absolutely love living here! We have a truly underrated food scene, and a strong base in the arts. I've lived in Canton, Fells Point, and now Little Italy, and all have been great neighborhoods. I will say that in these neighborhoods, you will have a hard time finding 4 bedroom, 4 bath properties (as suggested by Sam), because the properties in these neighborhood tend to be on the smaller side (1000-1600 square feet is common). You can find larger homes in Butcher's Hill, which is just north of Fell's Point, Mount Vernon, Union Square, Bolton Hill and Reservoir Hill, and there is demand for rental housing in all of these areas.

Good luck! Don't let anyone talk you out of Charm City. 

Jamie

@Sam Lewis hey Sam, thanks for the response!

The issue I'm having is finding anything that would cash flow in the area. I'm working with a local real estate agent so only using the MLS for my first property.

It's possible I just need to look harder or at more deals, but with rents only 700-900 per room I don't think I could get positive cash flow on a 2k - 2.3k mortgage.

Would you agree with this or could there be something I'm missing? I also would assume I might want to assign slightly higher than 5% for capex given the age of the houses, although this could totally depend on the specific houses themselves.

I've currently been looking at 2-3b and 2-3ba row homes and am finding only a few deals that barely squeeze out cash flow or just about break even. For a first property I think that's totally fine, better to get started than wait for the perfect deal. But I also could just be running the numbers poorly.

What are your thoughts here. Most of these houses come in around 270-350k from what I've seen

Originally posted by @Samuel Mallery :

@Sam Lewis hey Sam, thanks for the response!

The issue I'm having is finding anything that would cash flow in the area. I'm working with a local real estate agent so only using the MLS for my first property.

It's possible I just need to look harder or at more deals, but with rents only 700-900 per room I don't think I could get positive cash flow on a 2k - 2.3k mortgage.

Would you agree with this or could there be something I'm missing? I also would assume I might want to assign slightly higher than 5% for capex given the age of the houses, although this could totally depend on the specific houses themselves.

I've currently been looking at 2-3b and 2-3ba row homes and am finding only a few deals that barely squeeze out cash flow or just about break even. For a first property I think that's totally fine, better to get started than wait for the perfect deal. But I also could just be running the numbers poorly.

What are your thoughts here. Most of these houses come in around 270-350k from what I've seen

I have a friend who cash flows roughly 700 given my numbers in Patterson Park, with a 4/4.5 townhome. Granted he has higher level of vacancies since his home is in a higher crime area. 

I think cash flow is still attainable, especially when you eventually remove yourself from the househack, and ideally rent out that last room. 

A couple things - 3 beds will have one less room of course, and I am not sure - are you looking at properties that have a livable space in the basement that could be an unofficial bedroom not listed on the MLS? That extra livable space changes numbers drastically

@Sam Lewis that's a great point. The numbers I have been running would include me paying "rent" so I wouldn't be living for free but the numbers would at least make sense once I moved out.

The point about the basement is a great one. I have seen some houses that have large basements that are considered playrooms etc. with their own bathroom. These would probably be ideal for adding another bedroom and some kind of forced appreciation.

Thanks for the tip!

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