Is Baltimore a good place for REI?

16 Replies

When I reach out to investors, crime rate in Baltimore always hold them back from residential and commercial investment. Why do you invest in Baltimore? How do you deal with the security concern?

@Silvia Sun

Despite popular belief Baltimore is a great place to invest. There are tools that can give you a detailed view of where crime is most prevalent (Trulia is one of them). I invest in Baltimore because the of returns particularly. Baltimore/Md has to be within the top 5 Cities and states the are giving the most return on the dollar. When you analyze the rent rate and housing prices it begins to be a clear distinction as to why a lot of investors buy here despite the crime and favorable tenant laws. These drawbacks do exist, but every investment has its amount of risk. It's up to the investor to do there due diligence to mitigate those risk in order to capitalize off of any investment equation. Baltimore is no different! as the saying goes Scared Money Don't Make No Money.....

The decision of whether or not to invest in Baltimore depends on your goals.  There are neighborhoods that will only work with the slumlord model, there are some great B class cashflow neighborhoods, and many neighborhoods where flippers are making a killing due to demographic shifts and plentiful inventory of distressed property.

I'd worry less about crime reports, Great Schools ratings, etc and instead focus on the market.  If there are a lot of retail comps in the area then you know you're looking in a neighborhood where people want to live, and that is where I want to invest.

@Silvia Sun , what @Joe Norman is saying is spot on.

Depending on your risk tolerance/ ROI requirements, Baltimore may be a great place or bad place to invest in.

If you're looking to take more risk, then there defiantly is more opportunity in Baltimore than if you are trying to simply make a small return with little to no hassle factor. 

That being said, there are areas in Baltimore that are B/C grade that should make for less risky investing. 

I have included a map to help you dial in your search once you decide what you are looking for in terms of risk and return.

     Many thanks to you guys for answering my question!

Actually I would worry less about Baltimore as a place for REI, since I travel to Baltimore a lot and have my own understanding about the city security. However, investors who have never been to Baltimore tend to interpret what they learned from social media news into a negative image of the city.

Next time I should definitely talk more about the huge market potential, and show them good graphics!

Hi Jin,

My top 5 reasons for investing in Baltimore is:

1) The Accessibility - it is a great central location and short train/bus from major markets in Philadelphia and DC and local markets like Newark/Wilmington DE, Annapolis, Frederick, Silver Spring, Columbia, Hyattsville etc. 

2) The University Systems - Top Tier Schools in their respective industries like JHU, JHU Medicine, UMD Law, UMD Medicine, MICA, UMBC, Loyola. Also lots of excellent local schools like Coppin State, Morgan State University, Goucher College. Collectively these school systems produce a lot of rental demand and are appealing to large companies. A multinational eduction company, Laureate International is also based here.

3) Local Industry - The main industries in the area are sometimes referred as "Eds and Meds". Industries like biotech, medtech, and pharmaceutical research will set up in and around Baltimore due to proximity to both JHU, UMD and the National Institute of Health, which has a $30 billion budget, majority of which is distributed as research/project grants. UnderArmour's headquarters are also based in Baltimore.

4) Value - residential properties easily earn 10%-12% year 1 (for those who know the areas best) and the high cap rate is driven by the immense demand for rental housing. This is due to the relatively low purchase price for an urban market as stable as Baltimore and the presence of a large low-middle market population.

5) Stability - contrary to what you read about, Baltimore is very stable. The cap rates have lowered very slowly for a long time now (lowering cap rates means higher property values). Of course the market hasn't grown at the rate of others like DC and the Southwest cities you are hearing about, but it continues to grow for investors which means appreciation benefits over time. 

For a long-term investor, Baltimore means high cash flow, stability of a large metro area, equity buildup from paying off mortgage with rental income, and slight appreciation.

Most out of state investors come here to catch %2.5 rule :)))

They buy dirt cheap, then they suddenly realized they are in the war zone :D)))

I pay decent money, stay in decent neighborhoods, and very happy about it.

Originally posted by @Joe Norman :

The decision of whether or not to invest in Baltimore depends on your goals.  There are neighborhoods that will only work with the slumlord model, there are some great B class cashflow neighborhoods, and many neighborhoods where flippers are making a killing due to demographic shifts and plentiful inventory of distressed property.

I'd worry less about crime reports, Great Schools ratings, etc and instead focus on the market.  If there are a lot of retail comps in the area then you know you're looking in a neighborhood where people want to live, and that is where I want to invest.

Fully agree with Joe - Baltimore is so diverse and while there are areas I personally wouldn't invest in, I like the sweet spot of Class B neighborhoods with a fair share of working class and Section 8 voucher holders (my two favorite types of renters for cash flow). 

Baltimore County also works! I love Parkville, Dundalk and Middle River.

@Sam Lewis thanks! Are there particular parts of those areas that you like? I've heard that certain parts of Middle River and Essex are better than others as far as crime. I'm not really familiar with those areas, so I wasn't sure if you might know a little better.