Type of property to invest in Baltimore-Washington areas for rent

10 Replies

Hi Folks

I am completely newbie in the field of real investments. Up until now, I was focusing on saving so I can invest, in real estate. Talking to few of the lenders, I found that with my saving and amount of the loan I likely to approve, I can buy property of ~$400K. It would be helpful to start, if I can get advice for followings.

Objective: Hold and Rent Investment

Que 1. What is the best area to buy property for rental income in Baltimore-DC area. I live in Howard County, closer is better, but I would rather focus on business value of location then proximity to Howard County.

Que 2.  

A. What is the best property type to invest for rental income in this area, SFH, townhomes , condo, or multi family?

B. Based on the book I read, it seem Fourplex are the best choice. What is opinion of experience people about it? Where multifamily property like Fourplex located in Baltimore-DC area.

Thanks

Are you willing to buy a du/tri/quad plex and live in one of the units? If so a low down FHA loan would be the way to go as an owner-occupant.

As far as where to buy that’s on you to figure out. Where would you want live?

Beware of Bmore and DC as there’s additional hoops to jump through to get the pleasure of providing housing to people who need it. 

Indeed. I provide housing to people in DC and it is extra work! Licenses, TOPA (though that’s less of an issue now) and generally tenant friendly. It has been a lucrative market over the last 15 years though!

Marla & Jon Thanks

Marla, do you rent multi family property? Do you agree it is better for renting them condo or townhouses or SFH? Could you advice, which area to focus for multi family property?

If you're looking in Baltimore City / Baltimore area, you may be able to find a decent multifamily for your price point. If you're looking in Montgomery/Howard County, if you can even find a MF property, it would be way over your price point. 

If you can buy it right, you could rent out a SFH or townhome too, but it all depends on what location you choose and the prices in that area.

I know that I have seen @Russell Brazil give his insight on the multifamily market around here. Perhaps he can chime in here too.

Originally posted by @Jacob K. give his insight on the multifamily market around here. Perhaps he can chime in here too.

 In 2017 only 218 multifamily properties in the DC metro area sold. I sold 6 of them, so with that number I captured about 3% of the market and was the top multifamily agent in the area.

This year 139 have sold. Ive done 3 or 4 of them. 

In Montgomery County you have to be careful of the rent control in Takoma Park. Very very restrictive and really thats where almost all the multis are in the county. DC you are better off since rent control is much looser...but the price points going to be well above the ops price point.

High demand, coupled with low supply makes this an especially competitive part of the already competitive market. Highest and best use of multis are as condo conversions, so a developer can pay more for them than a homeowner typically. The price points of my clients who have purchased multis as owner occupants is typically above $600k for a 2 unit in a marginal area and Ive done close to $2 million for a 4 unit in a nice area.

@Riteash Tiwari where to invest in part depends on your goals and financial situation. If your goal is cash flow that is likely to be a different area than if you mainly want appreciation. 

Baltimore city has great cash flow. I am very comfortable in nicer row house neighborhoods there. However Baltimore city has more risk and probably more hassles in dealing with the city.  I am OK with that you might not be.

Baltimore county might be the best compromise for you when it comes to risk, cash flow, affordability and potential for appreciation. 

Right now in Baltimore SFH (that includes Rowhouses) tend to produce better cash flow than multi family. I don't like condos as you have less control there because of the condo association. @Russell Brazil owns a condo or two maybe he can add some input regarding them.  I recommend against them.

Originally posted by @Ned Carey :

@Riteash Tiwari where to invest in part depends on your goals and financial situation. If your goal is cash flow that is likely to be a different area than if you mainly want appreciation. 

Baltimore city has great cash flow. I am very comfortable in nicer row house neighborhoods there. However Baltimore city has more risk and probably more hassles in dealing with the city.  I am OK with that you might not be.

Baltimore county might be the best compromise for you when it comes to risk, cash flow, affordability and potential for appreciation. 

Right now in Baltimore SFH (that includes Rowhouses) tend to produce better cash flow than multi family. I don't like condos as you have less control there because of the condo association. @Russell Brazil owns a condo or two maybe he can add some input regarding them.  I recommend against them.

 I do have 2 condos, and I had 2 others I sold off.  I rather like my condos and Im thinking about adding a couple more.

The due diligence on them is a little different. You have to dig into the condo associations rules and financials. You want to make sure the association is well funded, make sure a good property management company is running them and make sure the owners do not have too much say, because when they do, then you are at the mercy of idiots making bad decisions that affect you. 

Youve got to see if they have a history of special assesments, make sure their reserve funds are adequate. Condo fee needs to be reasonable and have reasonable or low growth. For the most part, most of the associations in Montgonery and Frederick County are pretty solid, with a few bad apples. DC is a coin flip...half bad half ok. PG county has some bad ones, Anne Arundel county tends to be mostly good.

Turnover costs on my condos are pretty negligible which is part of why I like them. Some carpet cleaning and paint touch up and Im good to go. Very low repair and capex compared to my single families.

Here is the downside....they dont appreciate as much. Its not even close for me. My frederick condos are not that much more valuable than what I paid 6 years ago for them.They are also more susceptible to price drops than single families as newer better condos come to market.

For the kind of condos I like...I like stuff in Frederick at $150k and under and preferably $130k price range with low fees that rent in the 13000 range....Germantown condos under $200k preferably $150k that rent for $1500.  I also like medium class condos, newer $300-$450k condos that break even on purchase but are in higher rent growth areas like Rockville or DC.

Because my Condos take up so little of my time, I think Im going to add 2 more. Likely 1 cheaper one in Frederick or Germantown and 1 more expensive in either Gaithersburg at Crown or in DC.

To me that is Charles Village, you will always have renter, however prices are high, so  details of what you want to do needed to give you better idea about it.

Best type is a town house these days. Multi Units are too expensive and in a downturn, they will lose their value the highest. I would buy a couple of town houses that need updates. You will get renters easily and it will also have equity in it.