4 Tips To Rental Property Investing In Baltimore City

[Yannik Cudjoe-Virgil]

4 Tips To Rental Property Investing In Baltimore City

Navigating your first investment in Baltimore can be quite tricky. Baltimore is considered one of the top rental markets in the country, and although its real estate can come with a lower entry barrier compared to surrounding cities, it still requires much local knowledge and expertise for success. For new investors looking for yield in this market, I hope these four tips provides much insight on how to strategize your next investment in the Baltimore:

1) Know Your Area

Baltimore is a very block-by-block city. One block can be very vibrant with occupied properties and homeownership, and the block around the corner can be completely distressed. It’s extremely important that you know the area you’re investing in. This can be the difference between profit and loss, and an investment that cannot sell because it’s not in a good area. Also, not all areas command the same improvement. You may not see the benefits in value or rents in certain areas, with respect to your rehab budget on the property. Try not to over improve. Stay away from warzones. Many investors who are new to the city get excited when they see $5,000 to $10,000 properties - compared to the surrounding expensive markets like Washington, DC. These properties are likely in high crime and blighted areas, and are not the best markets to find your next rental opportunity. My motto is that if I am not comfortable picking up a rent check at midnight, then I won’t invest in the area. In my experience, the biggest returns are in areas that are considered to be on the “path to progress.”

2) Know Your Property

Baltimore is notorious for having properties in complete disrepair. Many times, properties in these areas have values that do not exceed their replacement cost - making them tough to pencil for investors. Always do full due diligence on your potential acquisitions. I always check things like rental licenses, lead certs, or past permits, which can be found here. I never want to buy a property unless I know every detail and history (that’s available) on the property. In my experience, I’ve found a lot of property owners performing shady work in the city without proper permits, and when you purchase it, you’re essentially taking on potential liability. I’ve had sellers lie on paper just to get the house sold (and I have caught them in their lie too). Baltimore is also notorious for having lead issues. I always recommend getting a lead consultation to help you remediate and avoid any issues of being taken to court. Sometimes full remediation may not be economically feasible, but It gives you peace of mind.

3) Know Your Property Demographic

While knowing both your area and property are equally important, understanding your property demographic has a direct impact on the potential success of your investment. In my experience and speaking with other owners, areas that have an AMI of under $35,000, is where you start to see high delinquency issues. Be mindful of this when you start looking in “cheap” areas. Generally speaking, low income tenants don’t have the funds that you think you’re going to collect if you’re experiencing non-payment. And sending them to collections probably wouldn’t do much because they may not have the reserves available to become current. Don’t shy away from section-8 tenants. They are great opportunities to get surety of payment in full - especially during this COVID-19 pandemic; however, like any tenant, screen hard!

4) Know The Laws

Baltimore is not the most landlord friendly city and mainly because of the historical predatory and slumlord treatment of tenants in the city. It’s always good to know the eviction laws and process, so that in the event of non-payment, you’re prepared. Our leases are 29 pages long and thorough, to specifically avoid any ambiguity of what is allowed, what is not, and how it will be handled. If you’re doing a rehab, get in the habit of pulling permits. My rule of thumb is that if one subcontractor pulls a permit, everyone else does too, because inspectors will give you a violation if they catch something. Some of the city inspectors can be harsh if they find work being performed without permits. Inspectors aren’t stupid - so don’t risk it.

I hope these were helpful tips for your next Baltimore investment property!