MARYLAND! Where Are Y'all INVESTING?!?!

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MARYLAND! Where Are Y'all INVESTING?!?!

Travelle MasonPro Member
Rockville, MD · Member since 2018 · 93 posts · 28 votes

I'm new in town. I live in Rockville where there is practically NO small multifamily properties.

Aside from Baltimore and DC, where else can I look for multis?

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y

Less than 1/10th of 1% of properties in Montgomery County are multifamily 2-4 unit properties. The majority of those are located in Takoma Park, which has the strictest rent control on the east coast.  There is TP nonincorporated that has some.  One of my clients actually owns a couple there right outside the city limits.

In DC roughly 4% of the properties are multi 2-4 unit properties. Baltimore has a handful, as does Frederick.

Multifamily is amongst the most competitive segment of the DC areas market due to the low amount of them that even exist (and that number is shrinking with condo conversions) and the extremely high demand of them.

Montgomery County and DC allow for something called Accessory Dwelling Units. They essentially allow you to convert the basement to a rental if you are an owner occupant. Only available for owner occupants. The criteria for the properties is very strict for which ones qualify for ADU's.

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  • Teresa F.
    Residential Real Estate Broker · Clinton, MD · Member since 2008 · 297 posts · 178 votes
    6y
    Hi Travelle,  Try Takoma Park.  However, be mindful of the various rent control and tenant protections.   Best, Teresa
    2Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    Less than 1/10th of 1% of properties in Montgomery County are multifamily 2-4 unit properties. The majority of those are located in Takoma Park, which has the strictest rent control on the east coast.  There is TP nonincorporated that has some.  One of my clients actually owns a couple there right outside the city limits.

    In DC roughly 4% of the properties are multi 2-4 unit properties. Baltimore has a handful, as does Frederick.

    Multifamily is amongst the most competitive segment of the DC areas market due to the low amount of them that even exist (and that number is shrinking with condo conversions) and the extremely high demand of them.

    Montgomery County and DC allow for something called Accessory Dwelling Units. They essentially allow you to convert the basement to a rental if you are an owner occupant. Only available for owner occupants. The criteria for the properties is very strict for which ones qualify for ADU's.

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  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    Check out Hagerstown MD plenty of multis and affordable prices.

    3Reply
  • Arthur C.
    Flipper/Rehabber · Washington, DC · Member since 2018 · 66 posts · 7 votes
    6y

    @Russell Brazil

    Gotta jump into this discussion as your last paragraph got me to become inquisitive further re: topic of ADUs. You mentioned that in order to convert the basement to ADU, the primary unit has to be owner occupied at the time of conversion. Correct? What about if it hasn't been owner occupied yet when ADU conversion begins and owner intends to occupy the primary unit once ADU conversion is completed?

    Secondly, I’m assuming if owner decides not to live there anymore a couple of years after the conversion, can owner still legally rent both units separately?

    I am pretty sure this topic is something that a lot of investors in DC would be curious to know as they would always seek to produce any potential for greater rental income.

    AC

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    @Arthur C. ADUs are only available to owner occupants. If you move out, no more ADU. You can not rent out the other unit. You can only rent out the property in its entirety.

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  • Arthur C.
    Flipper/Rehabber · Washington, DC · Member since 2018 · 66 posts · 7 votes
    6y

    @Russell Brazil

    Are you sure? From my understanding, ADUs don't necessarily require that they must maintain same entrance as the principal dwelling in and out of house. In other words, ADUs can have their own separate entrance with no access to the living space that belongs to the principal dwelling. How would that work with ADU and principal dwelling having its own separate entrance when owner has to rent the property in its entirety? This makes no sense to me unless I'm missing something here?

    AC

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  • Nicholas Conner
    Member since 2020 · 4 posts · 5 votes
    6y

    Look at areas around aberdeen proving grounds ( Harford county) Huge military installation. Transient workers with above avarage income and lots of supporting infrastructure. 

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    @Arthur C.

    ADUs are only available to owner occupants. They are not available to anyone else.

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  • Eric Teran
    Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
    6y

    @Arthur C. Here is a link to the DC ADU zoning handbook, http://handbook.dcoz.dc.gov/use-categories/other-uses/accessory-dwelling-units/.

    As @Russell Brazil says it is only allowed for owner occupants to rent out.

    1Reply
  • Arthur C.
    Flipper/Rehabber · Washington, DC · Member since 2018 · 66 posts · 7 votes
    6y

    @Eric Teran

    @Russell Brazil

    Thanks for the link. Looks like ADU is not permissible in dwelling units zoned in RF-1 so this becomes irrelevant for me. Instead of ADU, would that just be another principal dwelling in the basement then? Not sure what else to call it if it's not an ADU.

    AC

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    @Arthur C.

    No, you can not rent out the 2 units seperately. No matter what way you want to try phrasing it, there is no work around.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    Its also worth noting....there was just a fire on Kennedy street. Fire, 2 people died. No rental license, property illegally cut up into multiple units.(among other safety violations) Owner charged with murder

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  • Arthur C.
    Flipper/Rehabber · Washington, DC · Member since 2018 · 66 posts · 7 votes
    6y

    @Russell Brazil

    Interesting... because I know a couple of investors in Capitol Hill and Trinidad neighborhood - both zoned as RF-1. They rent out both the main floor and the upper floor as one unit and the basement as other dwelling unit separately.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    @Arthur C.

    They either have a legal multifamily or they are doing it illegally.

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  • Arthur C.
    Flipper/Rehabber · Washington, DC · Member since 2018 · 66 posts · 7 votes
    6y

    @Russell Brazil

    I don’t think it’s a multi family. If I recall correctly, they split 50/50 on all utilities. One of the investors is a well known developer. I don’t want to name him but if he’s a developer, he should have known this is illegal, which is why I thought it’s okay to rent two separate units. It is definitely a single family home but just that it has no stair connection from basement to the main floor.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y
    Originally posted by @Arthur C.:

    @Russell Brazil

    I don’t think it’s a multi family. If I recall correctly, they split 50/50 on all utilities. One of the investors is a well known developer. I don’t want to name him but if he’s a developer, he should have known this is illegal, which is why I thought it’s okay to rent two separate units. It is definitely a single family home but just that it has no stair connection from basement to the main floor.

     If they are splitting electricity, thats like a 95% chance its illegal. Both ADUs and legal multis need to be seperately metered. 

    Although seperate meters does not automatically mean legal either.

    Tax records on multis are correct about 80% of the time on unit count and are incorrect about 20% of the time. When tax record is wrong, a deep dive into the land records to check variances granted will illuminate if a conversion was legal. I sold a legal 3 unit last year that was listed in the tax records as a 2, but we found the variance in the land records. 

    Legal conversions largely ceased in 2012 I believe. Everyone always says they know of conversions after that, but they can never come up with an address on them. Also confusing with ADU licenses is that in the public records search sometimes the rental license is listed as multifamily when its an ADU, but there tax record will indicate 1 unit. DCRA is just sloppy with the data entry.

    The use codes for property taxes are almost always correct, but those don't differentiate between 2, 3 or 4 units. They do however differentiate between whether it was originally built as multi, or converted later.

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  • Derrick Whatley
    Rental Property Investor · Cleveland, OH · Member since 2020 · 2 posts · 0 votes
    6y

    @Russell Brazil I like your style straight to the point!

    0Reply
  • Eric Teran
    Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
    6y

    @Arthur C. @Russell Brazil

    There are different types of zones. Some zones allow a two-unit building where each unit is completely separate from each other and an owner does not have to live there. As mentioned the RF-1. The link gives a quick overview. Most of my clients convert a single-family house into two units and sell them. However, I do have a few that have kept them and rent them and they do get a license as rental units. These are two completely separate units with fire-rated ceilings/walls and so on. They should not be sharing utilities because each unit is its own entity and could, in theory, be sold without the other one. 

    The other zones, for example, R-2 cannot be subdivided and may only contain an ADU. The ADU has to be owner-occupied and utilities may be split. If they move they can rent it as one single unit and the new tenants can use the cellar as an office space or whatever they want. If the ADU is rented out separately then this would be illegal.

    DC is so backed up and understaffed they probably would not notice. The owner would only be called out on this if a neighbor or a tenant complained to DC. Most infractions happen due to a neighbor notifying DC. 

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y
    Originally posted by @Eric Teran:

    @Arthur C. @Russell Brazil

    There are different types of zones. Some zones allow a two-unit building where each unit is completely separate from each other and an owner does not have to live there. As mentioned the RF-1. The link gives a quick overview. Most of my clients convert a single-family house into two units and sell them. However, I do have a few that have kept them and rent them and they do get a license as rental units. These are two completely separate units with fire-rated ceilings/walls and so on. They should not be sharing utilities because each unit is its own entity and could, in theory, be sold without the other one. 

    The other zones, for example, R-2 cannot be subdivided and may only contain an ADU. The ADU has to be owner-occupied and utilities may be split. If they move they can rent it as one single unit and the new tenants can use the cellar as an office space or whatever they want. If the ADU is rented out separately then this would be illegal.

    DC is so backed up and understaffed they probably would not notice. The owner would only be called out on this if a neighbor or a tenant complained to DC. Most infractions happen due to a neighbor notifying DC. 

    2 seperate units?.......or 2 seperate properties altogether, ie, condo conversion....thats a big distinction.

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  • Eric Teran
    Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
    6y

    @Russell Brazil I should have said two separate properties and not units. 

    0Reply
  • Kyle DeutschmannPro Member
    Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
    6y

    @Russell Brazil hey Russell, thats very helpful to know about the ADU laws in DC and Moco. I see you clearly reiterated its only for OO properties, but what about 2nd homes? I.e. if someone were to buy a 2nd home in the area and essentially house hack it by renting the main part of the house and keeping the ADU vacant so it could be legitimately used as a 2nd home? Thanks!

    [email protected]
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  • Lowry Coe
    Member since 2019 · 23 posts · 9 votes
    6y

    @Russell Brazil would love to get your thoughts on Frederick? I purchased a home there about three years ago with the hope that the money keeps flowing up 270 like it did to clarksburg and Urbana. I’ve also heard from some friends who work for various builders that there seems to be a lot of upcoming investment in the area.

    1Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Travelle Mason

    We had that same exact problem when we first got to MD and we live in Columbia, MD. 

    Solution: We move to Fells Point in Baltimore when our lease was up at the apartment we were living in. 

    What I tell people is you have to be able to make that sacrifice. You go where the action is. 

    1Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    What if I buy the property, live in it for one year, move out but leave my goldfish with the renters that replace me. Then can I rent the ADU?

    0Reply
  • Solomon Morris
    Rental Property Investor · MD · Member since 2018 · 287 posts · 205 votes
    6y

    @Travelle Mason download homesnap, set up the multifamily criteria search and check it everyday.  Good luck.

    1Reply
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