All Forum Posts by: Andrew Hemminger

Hi Cate,

My strategy is buy and hold so a bit different than what you are describing but I was born and raised in Annapolis....still live there actually.  I would recommend also looking at Severna Park or other areas East of the Severn River as they have the best schools which helps for resale/appreciation.  Annapolis is a strong market but be sure to look at which school the home would register for.  Public schools are spotty in Annapolis unfortunately...residents are fairly wealthy and thus many have elected to send their children to private school which (in my opinion) has hurt the public school system.  The Severna Park and Broadneck school districts in Annapolis are best.  

For areas between Annapolis and DC, I would recommend also looking at Davidsonville or Crofton....very good school districts with lower prices than Annapolis.  Homes in those areas will also offer more land than you will find in Annapolis.  Resale should be good as well due to the strong employment opportunity in DC.

Sorry I can't give you a definitive answer on which area you should focus on...most submarkets in the DC region offer really strong appreciation and resale value.

Good luck!

Andrew

I agree with Russell...you need to pick what your dominant goal is...appreciation or cash flow.  It is harder to cash flow in the nicer Anne Arundel neighborhoods, unless you get creative like Joshua discusses.  I have a rental in Baltimore that cash flows over $600/month but you really need to drive the city to understand the area.  Baltimore presents great returns but crime has to be understood.

Another option you might want to consider if you aren't planning to self manage:

Pick another area of the country to invest in...this becomes much easier if you have a family member or close friend in that area to lean on for help with understanding the market (you can do all the research you want on an area but nothing beats boots on ground).  Do you know any friends or family elsewhere?  

Good luck!

The concepts are mostly simple to understand...the challenge comes in when folks don't maintain discipline and allow emotions to influence their decisions.  For example, rehabbing a property to suit your tastes may not be the optimal approach depending on the market.  Eagerness to get a deal can sometimes lead folks to compromise on their criteria and due diligence.  These mistakes are more common earlier in your investing career.  

Biggest thing that keeps folks from getting started:

1)  They are too afraid or suffer from "paralysis by analysis".

2) They aren't motivated enough to put in the work and commit.

Welcome and best of luck Calvin.

Ken,

Where exactly is this community?  I've lived in Annapolis for over 30 years and might be able to provide some specific advice on the area.  I do own a condo as part of my rental portfolio and would offer the following warnings:

1) HOA fees can be increased, especially in cases where the Board is looking to raise additional capital for deferred maintenance (or if there large groups of occupants not paying their dues). Alternately, they might charge one time "special assessments" to cover large capital improvements. For example, every homeowner might be required to pay a one-time expense (e.g., $1000) to fix the roof. Good HOAs budget for these types of maintenance/capital expenses and ensure that their members are paying their dues. That way they don't have to resort to HOA fee hikes or special assessments. You really need to dig into the financials of the association to understand the whole picture. How much do they have in "reserves"? Do their available reserves cover upcoming maintenance/capital expenses? You should also walk the property and assess if their is a lot of deferred maintenance, which would offer more evidence that the association is not healthy.

2) You need to review the HOA bylaws in their entirety. Often times HOAs will only allow a certain percentage of the homes in the community to be rented. Additionally, they often will require minimum terms such that you can't market the property to short term tenants (not always a big deal but it limits your pool of tenants). Don't trust what the agent or HOA tells you...look at the bylaws.

3) Most banks won't offer financing on a condo if the HOA is in bad shape. Most banks get concerned when their are high delinquency rates on HOA dues and/or low owner-occupied percentages within a condo community. Disclaimer: I'm not a lender, so others can probably provide more accurate advice here.

Bottom line, you really lose a lot of control investing in condos...mainly because the HOA has so much influence on whether or not your property is a successful investment.

I love my condo...but I consider myself lucky. It was my first investment and I probably should have done more homework in hindsight. With that said, the HOA's financial standing is excellent and they keep the property in amazing shape. The condo is also in an excellent area that has appreciated nicely. BUT like I said, I got lucky.

Best of luck,

Andrew

Hi Ken!

Welcome to BP!  I live in Annapolis, MD and own a Buy and Hold property in Baltimore, MD.  Good cash flowing market but you really do have to be careful with the area...lot of variation in crime and neighborhood quality depending on where you look.  There is also an incredible amount of development in the area which has caused the rental market to soften a bit (average rents in 2017 dipped as Supply exceeded Demand).  Nonetheless, still a good cash flowing market...just need to keep your eyes open to the potential risks and be conservative on your anticipated rent.

Anyhow, best of luck to you!!

Check out Cozy.com. I just started using the site and have been fairly happy with it. It offers marketing, tenant screening, and online rent payment at no cost. They make money off the rental applications and online rent payments (2.4% if the tenant uses a credit/debit card, otherwise free).

Greenbriar is probably a safe bet.  There is a huge development planned to occur just a bit further East off Forest Drive (near Spa).  The development will include senior homes, towwnhomes, shops, etc.  So there is some investment and growth in the area.  This is a good sign but will also become your competition so you'll probably want to rehab the property at some point to compete.

I'm very familiar with that area. There is a rough neighborhood behind the Safeway supermarket (Bywater Projects I believe). With that said, the rough neighborhood is surrounded by good and stable neighborhoods. Make sure you run your numbers including HOA fees and all other potential costs. Property in Annapolis below 200k is not very common and mostly limited to condos which often have HOAs. A $300 to $400 monthly HOA fee can really hurt your returns. HOAs can also have restrictions relative to renting out the unit. Not that I hate condos (I own one in Charleston SC that rents nicely) - just do your homework. Good luck!