All Forum Posts by: Martin Smith

Quote from @Jack Seiden:

Quote from @Martin Smith:

Quote from @Jack Seiden:

It depends on where you are living, how long you think you will be living here, if 3 years is the minimum but a good chance it’s gonna be longer bite the bullet & buy, if 3 years is the max it’s probably better to just rent, regardless nothing will cash flow, the big benefit is locking in your payment, but the value of that depends on the timeline, as far a where that would really depend on your preference’s in price point, do you want urban or suburban living, how big a space, how nice etc? Good luck!

I have to say, I disagree. Buying when you plan to live in a property for only the next few years can be an EXCELLENT way to get competitive owner-occupant financing and low down payments on something that will be converted later into a rental. If you are able to make considerable improvements in those first few years while living there, being an owner occupant during that time also allows you to take out a HELOC on the property much more easily than on something that's already a rental, giving you valuable access to capital for subsequent projects. Owner occupants have access to all sorts of loan types and programs that investors do not. So getting ownership over something in that context makes a great deal of sense, as long as the longer-term plan is to move out and rent out the property, rather than selling.

The last point I'll make is that the most profitable use of a rental unit in most DC neighborhoods is as an AirBnB - but that's something that's only available anymore to owner occupants of a home renting out another unit in the same property. It can be a great opportunity to run an STR for those three years that he says he's going to be there and build up a bit of a stronger reserve fund for when he converts to medium or long term rental when he moves out.

 None of this is true in todays market though, you pay more per month to buy than rent anywhere in our area & frankly the country at this point, so it takes time for both having bought to be worth it and to move out and make cash flow, there are very few if any properties that are “value add anymore” I’d know because I look At 17 counties daily for deals & if there’s one I’d have bought one, heloc’s are bad debt ar this point, usually double digit debt, again all of these issues are solved with those but if your gonna live somewhere for a year or two he would probably rent and no amount of realtor ******** changes that, this market is different than a low interest rate environment and people owe thier clients at least to properly explain that to them.

I think it's still very true in today's market that there are good deals out there. You have to work harder to find them, but they're out there. A great realtor is going to listen to a client's longer term goals and help identify the right type of property for them and the right location. Sometimes, that's going to mean going off-market and doing direct communications with the owners of the right places to see if they may be willing to sell. 

As for HELOC's being "bad debt", I just don't agree with you on that. First and foremost, I said it was easier to GET a HELOC on an owner-occupied property - not that you ought to run off and max one out. I've had some HELOCs for years and never charged a penny to them. Most are free if you don't owe anything, but even a $100 annual fee here or there is worth it to know you have *access* to the money if you need it, later on. And most are variable rates. So even if you take it out now as an owner occupant when it's easy to GET one, there's nothing at all stopping you from sitting on it and waiting for rates to go down before you actually USE it. But HELOCs are very difficult for investors to access. If you take it out when you're still an owner-occupant, you have the ability to get one fairly easily and you can decide if you want to use it or not later on with whatever rates are at the time.

As a realtor, I think a pretty big part of my job is sitting down with clients and going over a variety of goals, guidelines and spreadsheets with them. I've advised many clients to wait and rent for a while. But I've advised others to go ahead and buy, because what they said they wanted was something that was achievable, despite the interest rates. What Huzaifa described above is doable in a profitable way in some areas in DC. It's harder in others, and impossible in some. But I wouldn't issue a judgement as to if the best idea is to write it off altogether and say "just rent for a few years" without talking with him more first. 

Quote from @Jack Seiden:

It depends on where you are living, how long you think you will be living here, if 3 years is the minimum but a good chance it’s gonna be longer bite the bullet & buy, if 3 years is the max it’s probably better to just rent, regardless nothing will cash flow, the big benefit is locking in your payment, but the value of that depends on the timeline, as far a where that would really depend on your preference’s in price point, do you want urban or suburban living, how big a space, how nice etc? Good luck!

I have to say, I disagree. Buying when you plan to live in a property for only the next few years can be an EXCELLENT way to get competitive owner-occupant financing and low down payments on something that will be converted later into a rental. If you are able to make considerable improvements in those first few years while living there, being an owner occupant during that time also allows you to take out a HELOC on the property much more easily than on something that's already a rental, giving you valuable access to capital for subsequent projects. Owner occupants have access to all sorts of loan types and programs that investors do not. So getting ownership over something in that context makes a great deal of sense, as long as the longer-term plan is to move out and rent out the property, rather than selling.

The last point I'll make is that the most profitable use of a rental unit in most DC neighborhoods is as an AirBnB - but that's something that's only available anymore to owner occupants of a home renting out another unit in the same property. It can be a great opportunity to run an STR for those three years that he says he's going to be there and build up a bit of a stronger reserve fund for when he converts to medium or long term rental when he moves out.

Something that has been helpful to some of my clients has been to do a visioning exercise. Take two or three recent deals you have analyzed. Imagine that we are five or ten years down the road. Run some numbers there. Be extremely conservative - assume very low rent growth, very low appreciation, and fairly stagnant interest rates, meaning minimal opportunity to increase cash flow through a refinance. 

Look at all of those deals with that lens. Consider the amount of the mortgage that has been paid down (and by extension, the amount of equity that has built up!) naturally. Recognize that it's unlikely that everything stays conservative in how reality unfolds - chances are, between rent growth, appreciation, and interest rates, something is going to move at an above-average pace. But even if they all did stay conservative, would you still be happy with how things were going? What would you be planning to do with that equity? What would that cash flow allow for you to pursue that you otherwise couldn't? Would you have regret when you think of yourself that far in the future that you hadn't purchased five or ten years ago (which is actually now)?

Lastly, do you think your wife might be willing to participate in some sort of "guided visioning" with you? Oftentimes, when one half of a couple is opposed to real estate investing, it really comes down to them viewing it as a cumbersome, risky distraction, rather than as a relatively stable, valuable tool to help reach your shared goals. Sometimes, talking with them (with the right person guiding that conversation) about your shared vision for the future can help turn them around. 

Whatever you end up doing, good luck! 

Tracy, I've worked with investors in Baltimore before, including out of state investors who have purchased sight unseen. Baltimore is a city of neighborhoods, and is very much a "block-by-block" city - there are no entire zip codes that would make "good" investment properties. 

If you could share a bit more about what some of your goals and priorities are (cash flow vs appreciation, property size, turnkey vs rehab, etc), I'd be happy to make a few suggestions about some good areas to look! 

Quote from @Russell Brazil:

Quote from @Kal Wol:

@Martin Smith I live in Germantown Maryland and I wanted to invest in state or neighboring VA or DC to stay close home as I am starting this journey out.

So Baltimore houses have low entry with high risk. And I am trying to find out if I can get the best area in Baltimore it will solve my problem of low entry and better risk as compared to unknown areas that I don't have visibility.

Also, I am showing lots of interest in Baltimore, and also in some part of DC, and am thinking in a couple of years from now, it might be a good investment opportunity. So these are the driving factors that I am looking into it.

 You could consider Canton, Federal Hill, Fells Point. Entry pointes will be $375k plus generally. 

Russell is absolutely correct about Canton, Federal Hill, and Fells Point. I’d add Butcher’s Hill and some blocks in Mount Vernon to the list. 

Baltimore is one of the more affordable entry points in the region - you’re also right about that. But a lot of the issues with Baltimore are structural in that it is an extremely pro-tenant political and legal environment, the utility companies can be difficult to deal with, and the permitting process can be cumbersome. For those who have the stomach for it, Baltimore can be a great choice! But, it’s not necessarily the best option for every new investor. 

DC has a LOT of benefits - top among them that it is geographically limited. If you want to live IN the District itself, there’s only 68 square miles of it, and a big chunk of that is taken up by parks, roads, and commercial property. Out of the remaining space that’s residential, significant portions are covered under historic districts, and all of it is covered under the Height Act, which means that there is simply a maximum volume of cubic feet of real estate of any sort that will ever be available there. That kind of unalterable limit on supply can be very helpful in driving values if demand stays strong. But, DC also has an extremely high barrier to entry in the form of those solid property values. That makes DC a great choice for the long-term landlord, but it means making anything cash flow within the first few years very difficult. 

Given that, I like the third point in the triangle - Frederick. Strong demand (fastest growing county in the state), limited supply downtown due to the historic district, limits on sprawl into adjacent counties because of natural resource management issues, somewhat less onerous landlord regulations, and the ability to find some properties that cash flow at least a little bit right away. It’s not nearly as easy as it was when rates were 3%, but it’s still doable if you know what to look for (and where!). Frederick also has a lot of long-term landlords who are getting towards a point where they want to retire and sell, and some may even consider seller financing. I know one building downtown that just went under contract where the seller was considering that. Frederick also still (for now) mostly allows AirBnB, which is an added bonus for folks who are interested in that. 

Overall, this region is a great long-term play. But the short term is difficult, so make sure you’re prepared for that! 

Quote from @Thu Minh Dam:

Quote from @Martin Smith:

Are you locked into only considering Virginia? There's a number of options in both Maryland and West Virginia that may actually be geographically closer to McLean than some of your Virginia options that may meet your needs for cash flow ahead of appreciation. 

Dear Mr. Martin, 

Thank you so much for your comments. I highly appreciate it. I choose north Virginia just because I think that this area has good appreciation. 
If you don’t mind, can you help suggest ”options in both Maryland and West Virginia that may actually be geographically closer to McLean than some of your Virginia options that may meet your needs for cash flow ahead of appreciation”. Many thanks 😊 

I would actually look at Frederick, MD for the best appreciation. It’s the fastest growing county in the state, and values are up SUBSTANTIALLY over the past five years, especially in the downtown core, but there’s still good opportunities in the right areas. Happy to chat more if you’d like - feel free to send me a DM!

Quote from @Kal Wol:

Baltimore looks nice and homes are somehow affordable the way I see it. But I am not sure what area of Baltimore is good for long hold for rental properties. Any content on that part would be very helpful.

Also what else do you think the investor should know regarding tax, legal and things related to the tenant in the great city of Baltimore. It seems most of the homes are older and wondering what insurance policies would look like also

So if someone can shade some light on these and general Baltimore related investment, that would be great. 

 You've stated that you don't actually live in Baltimore, so I am curious, what is your interest in Baltimore over other geographically close alternatives? I think certain parts of Baltimore can be wonderful choices for investors with specific goals, but it can be a more tricky market than other options, so I'm curious what your driving factors were in selecting Baltimore in the first place. 

Are you locked into only considering Virginia? There's a number of options in both Maryland and West Virginia that may actually be geographically closer to McLean than some of your Virginia options that may meet your needs for cash flow ahead of appreciation. 

Welcome to BiggerPockets, Damon! The greater DC area is a phenomenal place to start a journey like this, especially if you have some flexibility with your time and geography for your regular job (assuming you even have a "regular" job!). 

We have pretty considerable variety in this region for price points - you can find a HUGE range for a little thousand square foot place from $100k for okay condition in an okay neighborhood in Hagerstown up to $1,000,000 in pretty good shape in a great neighborhood like Georgetown, and everything in between. 

We also have a broad spectrum of state and local laws pertaining to long term rentals, short term regulations, rent control, tenant rights, eviction process and procedure, and business licensing throughout the area, ranging from extremely pro-tenant and anti-STR in a place like Baltimore to much more pro-landlord and deregulated markets in the further West Virginia suburbs.

I've spent a lot of time studying the different markets as they relate to different investing goals over the years. If there's ever anything I can do to help on your journey, feel free to reach out! 

I think you might have just not had the right realtor to help you see the opportunities that are available a bit closer to you. There's plenty of great options for different types of investors looking for all sorts of property types and investment strategies right in Maryland! Also, there's absolutely a considerable intrinsic value in being able to just get in your car and drive for an hour or two to get to your property if you need to. Let me know if there's anything I can do to help in your journey!