Baltimore, one of the oldest major metropolitan cities in the US, is not the kind of place most people think of right away for investing in real estate. A port town, Baltimore is a hub of higher education, life sciences, and a burgeoning technology scene. Let’s check out what Baltimore offers in the way of real estate investment opportunities.
- Baltimore has been a happening place since before the Revolution
- Wait, people are moving away from Baltimore?
- Is the Baltimore housing bubble real or not?
- Baltimore real estate market research fact and fiction
- Can you make money flipping houses in Baltimore?
- Buying rental property in Baltimore may be riskier than you think
- The facts about Baltimore home appreciation
- Another way to be able to invest in real estate
Baltimore has been a happening place since before the Revolution
Unlike many places settled by fur trappers or the British in North America, Baltimore’s history is a bit more interesting. An area settled for thousands of years by the First Nations due to the rich sea life and fertile bay flats, Captain John Smith first mapped the region in 1608. Originally settled by English settlers, by 1659 two different cities of Baltimore had started to grow. The town was named after Cecil Calvert, the Irish second Earl of Baltimore, who was given the land grant after he found his first in rural Newfoundland to be too cold, barren, and inhospitable.
Founded in 1729, it was a barony of Ireland, gaining a large German Lutheran and “Pennsylvania Dutch” influx in 1755. Draining the swamps, it quickly became the largest city between Philadelphia and Charleston. The area was key for iron ore, tobacco, and grain shipments and was a primary ship building center, all reasons it was heavily blockaded by the British during the Revolutionary War. Many people do not realize that Baltimore Harbor is where Ft. McHenry is located, the bombardment of which was observed by Francis Scott Key during the War of 1812, leading to his penning our national anthem, “The Star Spangled Banner”. Irish influence was important, as Baltimore became the location of the first Roman Catholic diocese in the United States in 1789.
Baltimore continues to be an economic hub. During WW1 steelworks and oil refineries fed the war effort, and even today Baltimore is involved with federal works as the Social Security Administration is located there as well as multiple military operations. Today the economy is pushed by a variety of things ranging from steelworks, processed food, paper and plastics manufacturing, electronics, automotive and airplane parts to higher education, medicine, and technology. No less than 12 institutions of higher education are located in Baltimore including the prestigious John Hopkins University and Medical Center. Baltimore is hoping that medicine, life sciences, cyber security and technology can carry their economy into the future.
All that sounds like jobs and growth, so why are people leaving Baltimore?
Wait, people are moving away from Baltimore?
Since Baltimore is the most populous self-contained metropolitan area in the U.S., and with this diversified an economic base going for it, it might surprise you to learn it is one of the three top areas in the U.S. people are leaving. Yes, leaving. It is because of the aging middle class population called baby boomers are retiring for warmer climates, less winter, lower crime rates, and simply a change.
It is really humorous when you do research on the real estate investment market in Baltimore, as they try to make it sound beautiful (1,000 miles of shoreline – much of it salt marsh) and how much sunshine they have, rivaling Florida. 2,000 hours a year they proudly claim… which is 83 days out of 365 the sun shines. No thanks, I like to work on my tan a lot more than that.
If they will mislead sunshine, they will totally mislead your pocketbook.
Is the Baltimore housing bubble real or not?
This is not an uncommon thing as we have seen, with Chicago, Detroit, and other areas “up north” experiencing the same thing. Baltimore real estate investment firms are hedging bets on Millennial and newly graduated from college coming to town for the growing technology and solid medical industries in the area offering work. Baltimore is, after all, a less expensive place to buy a house compared to other major metropolitan areas around the U.S., with the median price around $258,000. Dallas, for example, is $494,000 and Chicago, another “emptying” place, is $556,000. So what is it with Baltimore?
There is a house shortage because Baltimore rents.
Baltimore actually is going down in population, and more than they are admitting. Last year they were down -0.89%, which does not sound like a lot, but the rest of the US went up 0.7%. That means Baltimore lost 1.59% of their population comparatively just last year. Real estate investment groups are praying the younger crowds come to Baltimore to rent, not buy. Baltimore, you see, traditionally has been one of those places where more people rent than own homes, due to wage levels. The REIA groups are banking on that trend continuing, as rent profitability and increases far outstrip real estate valuation increases in the city.
Baltimore real estate market research fact and fiction
Real estate investment firms would have you believe that Baltimore housing increases are running well into the double digits. My research simply did not find that to be true, at least when you read the real data from the state and firms that stand to loose if they are not on the up with figures. Baltimore has come up a lot, yes, since the recession, as in 82% up, which means that when the bubble burst in the early 20-teens, it crashed – hard. The average increase in valuation for a home held for 3 years according to Zillow is around $5,000 profit.
Hhmm, spend $258K and sit on it 3 years for an average of 3.1% increase in local property valuation rise to only make $5,000 on it in 3 years. That is a return of 1.54%, and that is if it is not a flipper, less remodel costs. Why would I risk my investment dollars on that low a percentage in an area very heavily tied to the national economy for 3 years when I can make 80-90% on my lead gen properties consistently?
Can you make money flipping houses in Baltimore?
Probably not, and the reason is the difficulty in finding one of those decent priced houses. Baltimore is not a place to buy and flip a house, it is a place to buy and rent out a house, and not short term, either. Short-term rentals only recover about one-third to one-half monthly of what a lease brings in, another area the “statistics” vary wildly.
Short-term “vacation” (i.e. students and medical necessity generally) rentals are under serious attack by the municipal government and it is not looking good. Regulations are being passed that licenses for such will not be issued, period, for any new owner of real estate within Baltimore limits. Sounds like grandfathering existing landlords to me. This is coupled with the fact that the #1 online short-term rental company states the average return monthly is $658. The local real estate groups will tell you it is $2,270. Since the online group makes income from only what is real, I tend to trust them, and who wants a short-term rental you cannot rent?
The real problem in Baltimore real estate investment is there is a shortage of houses to buy in the first place, and those are tied up by local investors.
Buying anything in Baltimore, any successful area investor will tell you, is a boots on the ground activity. You need to be local with local connections, walking around talking to the corner grocery store owner and the painter carrying a ladder out of a job site. Checking on signs, city notices on doors, and tax lien buyers requires being there and gaining trust. Being out of the area and trying to buy anything is difficult and risky due to neighborhoods with high crime rates and local control.
One reason being this is so important is that Baltimore is a whole web of neighborhoods. The ones where “decent priced” houses are tend to be row house areas in tougher or rougher neighborhoods, or those with big diverse mixes. While diverse is a good thing, rough is not. You really have to know what you are getting into to even have an inkling if the place will be desirous to rent out to someone, and get them to stay.
Buying rental property in Baltimore may be riskier than you think
While rental property can be profitable in Baltimore if you can find the right place with rent starting around $1,400/mo, there is a little problem of local regulations rearing their heads. Baltimore has a long history of unscrupulous landlords who would evict on a dime and turn people into the street if they could get $100 more a month in rent. The City got tired of it and has passed what are being labeled “draconian” anti-landlord regulations, which extends the time for an eviction to take place and mandatory arbitration. Cities that traditionally have those issues have a problem with blue color neighborhoods being strong-armed. Do you really want to go up against that as an absentee owner?
That stated, if you do find a decent piece of property to buy and rent, and have a really solid rental strategy in place to manage the place, you might be able to make some decent rental income off the property. Know, though, rent gaps could eat you alive with an economic shakeup, and it has to be a long-term strategy as you simply will not make quick return on your investment.
If you do buy rental property in Baltimore, it needs to be in a commuter suburb. Baltimore is one of the largest commuter populations in the U.S. with over 900,000 people coming to town daily to work in a town of only 611,000 people who live there. Thing is, a lot of them do not live even in Maryland, they live in Virginia and Washington D.C., where 200,000 of them commute daily from out of state into Baltimore to work. They do not buy homes or rent in Baltimore, and generally do not shop at businesses in Baltimore, because they simply do not live in Baltimore. They work and leave.
Can you say traffic?? No thank you.
The facts about Baltimore home appreciation
I am always concerned when I start to research a location, intent on maybe investing money in real estate, and running into seriously conflicting information between the real estate investment groups and associations, and the data compiled by places like Zillow that have to toe the line to maintain user credibility. Couple that with state data, and it really makes me step back when the chasm gets even bigger. This is exactly what I ran into when I dug into Baltimore.
While Baltimore is hoping to gear up for people exactly my age needing rentals because most of them (thankfully, not me) cannot afford to buy a home and must rent, what Baltimore is really experiencing is a population decline. Sources will say they are flat-lined, and that is just not true. They were flat lined for a number of years post recession and have been going down the last several. The US grew by +0.7% last year. Baltimore was at a -.86%. That means compared to the rest of the country, Baltimore lost 1.56% in population. The reason is people are moving away.
Baltimore is one of the big metropolitan areas that baby boomers are leaving, heading into retirement, by the droves. They are tired of crime, dense and somewhat grimy city living, and winter. They are heading to warmer places where they can play golf and have a martini at tee time. While that does not mean Baltimore is not going to see some catch up – eventually – what it does mean is all the talk about a housing shortage is a misstatement. There is most likely a rental shortage because the people who are there cannot afford to buy. Baltimore is one of the top metropolitan areas in the US where more people rent than own homes. Fact.
I am 30 and I understand not being able to afford a mortgage payment and trying to get your feet under you. I went through several years of that after I graduated from college when I got my first corporate job, in a major metropolitan area, making what I thought was a dynamite salary of $35,000 a year. Man did I get a rude awakening fast when I realized it barely paid my rent and expenses, and forget having money for a 3 day vacation or to invest – Hah! You are kidding, right? That cold glass of greenback water hit me in the face and made me realize I had to up my game and get another gig going so I had some extra income. After a lot of trial and error (and expense), I landed on my lead gen business, which is why I can afford to buy a house now at the age of 30. Click here to find out more info https://www.bestrealestatedirectory.com/lead-gen/
Another way to be able to invest in real estate
How I got into the lead gen business was kind of interesting. It is digital real estate, a lot like what I was hunting in Baltimore but without the taxes, upkeep, and risk. I own websites that help businesses get more business, and what business can’t use more customers? I had started out messing around with MLM’s, you know, multi-level marketing, from common ones to more esoteric varieties. They were expensive, buying in was expensive, and I made a lot of people mad pushing them to try and get them involved. It also was not a great match for my personality, but I pushed through it until I found drop shipping.
I did some work buying and reselling – drop shipping – on Amazon, and made some money, but man, it was a pain. My apartment was full of stuff, I was up every night boxing items, dealing with returns, and had to rely on someone else having inventory for me to even buy and resell. I was still working FT+ and had absolutely no time to myself or for my family and friends. I kept looking around because I just knew there had to be something better out there.
One night really late I was reading business blogs and happened on an article about a young guy not much older than me that had figured out just how bad business owners were at helping themselves grow their businesses by using the internet. That was something I knew something about, as I was watching it happen all around me. The guy, Dan, had written a training program to show people how to write their own websites called lead generation sites to help businesses get more customers, and he was doing really well with the business himself, as he was working it every day. That was putting his money where his mouth was to me.
I did some digging around about this Dan guy and found out that he was for real, and had started from scratch. He was making good money and was making a lot of headway helping small businesses especially grow, hiring people, adding locations, buying more trucks to put on the road. I could get into that. I am a big believer in owning your own business as a way to succeed, and making money helping others do it was even better, because everyone wins! There was a link, this one https://www.bestrealestatedirectory.com/lead-gen/ to set up an appointment. The guy checked out legit, so I clicked it and made a phone appointment to talk to “the man”.
Dan talked to me himself, and explained his training and what he was doing. It made total sense and was a good price compared to all the other money I had flushed down a rat hole trying to get ahead, so I paid the tuition, and started studying. I was kind of afraid it might be too technical, but I learned really fast that it was pretty easy and you built as you learned. The first site I wrote was this one
and it took me about six hours. It was really cool that I could get a piece of digital real estate up and running so easy and so reasonably. I followed the training and called around and gave the first few customer referrals to a guy who was really happy to get them. He called me back and asked to sign up with me, so I quoted him $750/mo for the leads. He paid me right away, and has been paying me every month for five years. He is still my customer, and I hardly ever touch the website, it still produces great. I have a few small expenses and have cleared over $36,400 in five years from this one site. Pretty good for six hours of work!
It was really encouraging so I built another, and another. In five months I was able to resign from the corporate job, and was paying all my bills. I had money to reinvest right away in my business as my profit margins average 80-90% consistently. It was a great feeling to finally be getting ahead, have some money to invest, and a safety net under me.
Five years later I just turned 30. I will clear well over seven figures this year off my lead gen business. I am my own boss, and I write my own schedule. Yes, it was work at first, but it sure was worth it! I travel when I want, work as long or as little as I want, and am investing in a comfortable future for myself.
One thing I learned, there are no miracles or free lunches out there. You have to put in some work. That is part of owning a small business. But, hey, I am no longer small and the stuff I do not want to do, I hire done. The coolest thing is I am doing the same stuff I was doing five years ago, except a lot more of it, making a lot more money. It feels great.
If you are tired of watching someone else make money off your labor, click on the link for a time to talk. You will not get harassing sales calls, your information is totally private. I just know there is way more business on the internet than I or all of us can ever handle helping businesses grow. There is no obligation. And the decision is totally up to you, there will be no high pressure anything. The only pressure will be your own thinking about making 80-90% profit margins working from your home office or sitting on the beach somewhere with your laptop working on your tan.
Digital real estate is the future, is now. Grab onto some and stake your claim on your own safety net. You will be so glad you did.