Invest in Baltimore Rental Properties
OfferMarket is based in Baltimore, MD. We are proud buy-and-hold investors in Baltimore City. In this article we will share the good, the bad and the ugly and explain why we believe Baltimore is ultimately an attractive market for single family and multifamily investment properties.
Geography & Location
Baltimore is uniquely situated just 50 minutes (42 miles) from Washington, DC. We agree with Ted Leonsis, majority owner of Monumental Sports Group which owns the Washington Capitals and Washington Wizards, that a "super city" is forming between Baltimore and Washington, D.C. This Baltimore-Washington corridor sprawls along Interstate 95 anchored by the Fort Meade (25 minutes), the National Security Agency (NSA) and associated defense and cyber defense contractors, Baltimore Washington International Thurgood Marshall Airport (BWI, 15 minutes), and a major medical contingent including University of Maryland Medical System, Johns Hopkins, and MedStar Health.
BWI Airport, a major base for Southwest Airlines, is the largest airport in the region, transporting more passengers than northern Virginia's Dulles International Airport (IAD) and DC's Reagan National Airport (DCA).
The Port of Baltimore, closer to the Midwest than any other east coast port, is the 16th largest port in the United States by total shipping volume. Primary exports include automobiles, light trucks and agricultural equipment. Primary imports include automobiles, light trucks, aluminum and and construction equipment. Baltimore's port is served by CSX for intermodal rail cargo shipping. The Port of Baltimore is also ranked 11th in the country for passenger cruises.
Prime real estate in the city is located along the Inner Harbor where there is essentially no undeveloped land, only opportunities for re-development. The most sought after neighborhoods around the Inner Harbor include Federal Hill, Locust Point (home to Under Armour and Fort McHenry), Fells Point and Canton.
Baltimore's reputation as one of the the most dangerous and corrupt cities in America is well deserved. From the Mayor's office to the Police Commissioner's office, there has been a lack of leadership and accountability. The city's deep-seated issues spanning from poor public education system, underserved communities, to unchecked drug and gang activity will take time to resolve.
The property tax rate in Baltimore City is among the highest in the country at 2.248%.
Baltimore sees a steady stream of young, skilled professionals entering the workforce. The city offers an attractive mix of urban living, an easy commute to local employers, and a cost of living considerably below the national average. As with most cities, there is a lifecycle with this demographic. First stop tends to be the Federal Hill or Fells point neighborhood out of college. Then to the quieter, nicer parts of Canton or Locust Point. Finally, once the children are getting ready to start kindergarten, it is out to the county to the better public schools.
Property Types & Cap Rates
Most properties in the high demand neighborhoods are single family row homes (townhomes). As a rule of thumb, a good investment will see monthly rent at 0.75% to 1.25% of the total price (purchase and renovation). So, for a $200,000 property, you're looking at monthly rent from $1,500 to $2,000. That's $500 to $1,100 per bedroom depending on neighborhood and the quality of the home. A Target cap rates in the city are in the 7% - 10% range.
Common floor plans and how much they rent for:
- 2 bedroom / 1 full bathroom => $1,600 to $2,100
- 3 bedroom / 2 full bathrooms => $1,800 to $2,800
- 3 bedroom / 3 full bathrooms => $2,000 to $3,000
- 4 bedroom / 2 full bathrooms => $2,400 to $3,200
- 4 bedroom / 3 full bathrooms => $2,700 to $3,400
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Long Term Value
Baltimore certainly has structural issues that are preventing it from being a truly thriving city. These issues will not be corrected over night, but we do believe the foundation is in place for stable, long term appreciation. If the public and private sector can work together successfully to address the governance and social problems head-on, and possibly reduce the property tax rate, we believe there is significant potential for above average price appreciation over the next 30 years. In the meantime, if you invest in Baltimore as is, you will more than likely build wealth if you invest selectively in the right properties in the right neighborhoods at the right price and manage your property like a pro.
OfferMarket is a real estate investing platform focused on single family and multifamily rental properties. Discover exclusive deals in Baltimore City and Baltimore County.