Have you thought about investing in the Baltimore real estate market in 2019? If not, you definitely should give this option a chance. Although Baltimore is not the first city which comes to the mind of experienced or beginner real estate investors, it offers excellent investment opportunities for both groups. Baltimore investment properties are not only affordable but also provide good return on investment with the optimal rental strategy.
Why Investing in the Baltimore Real Estate Market Is a Top Choice in 2019
There are many factors which make a housing market a top place to invest in real estate including demographics, economy, property prices, rental rates, return on investment, and others. Fortunately for those real estate investors looking to buy their first rental property or to expand their investment property portfolio in 2019, Baltimore combines all these positive factors. Let’s take a look at each one of them:
- Demographics: According to US Census data, the City of Baltimore has the largest population in the State of Maryland in addition to the 30th largest population among all US cities. Moreover, with a population of over 611,000 residents, it is the most populous independent city nationwide. Even though the population growth has been relatively flat in the past few years, this number of residents should be a strong positive signal for those interested in investing in rental properties in the Baltimore real estate market. In the world of property investing, a large population translates into a strong rental demand.
- Economy: The ideal environment for residential real estate investments is a diverse economy. An economy which focuses on just one industry – regardless of how successful this industry is at the moment – is a risky housing market to buy an investment property in. In case this economic sector collapses, the labor force will either be unemployed or start leaving. From the point of view of an investor, this means high rates of tenants’ defaults on paying rent or a sudden drop in rental demand. No worries, the economy in Baltimore is well diversified, with a good mix of jobs in the public and private sector including education, health, professional services, trade, transportation, and others. This is one more reason why property investors should be looking at the Baltimore housing market for their next rental property purchase in 2019.
- Rental Demand: Data from the US Census shows that the demand for Baltimore rental properties is as strong as ever. Indeed, Baltimore is one of the 22 largest US cities where the number of renters exceeds the number of homeowners. Now if that’s not excellent news for real estate investors looking for a top location in 2019, what is?! This is the most straightforward measure to show that your Baltimore investment property will enjoy high rental demand. And for investors and landlords, demand from tenants means higher rental rates, which on the other hand translates into good return on investment.
- Affordability: Even if you know the most profitable market in the US but you can’t afford to buy an investment property there, it’s of no use. That’s not the case with Baltimore. The Baltimore real estate market is highly affordable, with a median property price of $257,900 in December 2018, according to Mashvisor’s rental property calculator. This is only 16% above the national median property price of $221,500. The property prices make the Baltimore housing market very affordable, especially compared to other top markets for investments such as Phoenix (with median property price of $452,200), Dallas ($494,500), and Chicago ($555,800). This is one factor which makes a Baltimore rental property the perfect choice for beginner real estate investors who usually have less access to cash. Financing cheap investment properties is much easier.
How About the Gross Real Estate Investment Figures for Baltimore
Investors interested in buying real estate in the Baltimore housing market must be eager to see the return figures there. Baltimore real estate market investors will be making money in both the short and the long term:
Short-Term Return on Investment in Baltimore
- Average Traditional Rental Income: $1,560
- Traditional Cap Rate: 2.4%
- Average Airbnb Rental Income: $2,270
- Airbnb Cap Rate: 3.2%
- Airbnb Occupancy Rate: 53.1%
The data above comes from Mashvisor’s rental property calculator, which uses data from various reliable sources and the power of predictive analytics to show you the most profitable locations to invest in real estate in the US housing market. This tool will perform the real estate market analysis and the investment property analysis instead of you, with much more accurate results.
Although the Baltimore city-level cap rate of 2.4% might not look like a lot for real estate experts, who recommend a cap rate of at least 8%, this is just an average value. Indeed, with Mashvisor’s property finder you can find Baltimore investment properties with double-digit cap rate values.
As the data above shows, Airbnb is the more profitable rental strategy in the Baltimore real estate market. The rental income, the cap rate, and the occupancy rate are all better for Airbnb rentals than for traditional ones. However, investors should not gonfor short-term rentals immediately before they read the next section on recent Airbnb regulations in the city.
But before that, how about long-term return?
Long-Term Return on Investment in Baltimore
Successful real estate investors are those who make money not only in the short run through rental income but also in the long run with real estate appreciation. Natural appreciation is a fact in the US housing market, where in the past few decades the prices of real estate have grown more than inflation on annual basis on average. Since 2000, the price of Baltimore real estate properties has grown by 82%, for an average annual increase of 3.2%. This exceeds the rate of appreciation in most US markets.
Airbnb Legal Issues in the Baltimore Real Estate Market
Airbnb rentals have been doing great in the Baltimore real estate market. However, the situation is likely to change drastically very soon. For the past few months, the Baltimore City Council has been considering a bill which imposes strict regulations and taxes on short-term rentals there. Basically, no newly purchased properties will be able to get licenses to operate as vacation homes and only those with owners on site will be able to be rented on short-term basis.
That’s why Baltimore real estate investors should focus on traditional rentals, which are still a very viable and profitable investment strategy.
Investing in Baltimore Traditional Rentals
The large population, the diverse economy, the high ratio of renters, and the excellent expected return on investment are all indicators showing that traditional rental properties in the Baltimore real estate market are a top investment opportunity in 2019. The average traditional rental income of $1,560 might not sound like a lot, but investors should take into consideration the low property prices in the market as well. The average cap rate of 2.4% is more than what the majority of top performing US markets offer at the moment, on the city level.
So, if you’re convinced that Baltimore might be the right location for you to buy an investment property in 2019, which neighborhood should you go for?
The Best Neighborhoods for Baltimore Investment Properties
Location in real estate is not simply the state and the city but also the neighborhood where your property is located. Thus, it is important for real estate investors who aspire to succeed in the Baltimore housing market in 2019 to choose the best neighborhood to buy a traditional rental property.
1. Washington Village
- Median Property Price: $138,300
- Property Price per Square Foot: $123
- Traditional Rental Income: $1,260
- Traditional Cap Rate: 3.8%
- Airbnb Rental Income: $2,160
- Airbnb Cap Rate: 7.0%
- Airbnb Occupancy Rate: 52%
Washington Village, also known as Pigtown, is the most profitable Baltimore neighborhood for traditional rental investment properties. The most important aspect of this area, which has become home to many students, young couples, and retirees, is its demographic and economic diversity.
2. Patterson Place
- Median Property Price: $183,900
- Property Price per Square Foot: $139
- Traditional Rental Income: $1,430
- Traditional Cap Rate: 3.7%
- Airbnb Rental Income: $2,240
- Airbnb Cap Rate: 5.5%
- Airbnb Occupancy Rate: 62%
A small community close to Patterson Park, Patterson Place is one of the best neighborhoods to buy an investment property in the Baltimore real estate market. The area has a distinct urban feel, and most of the population rents.
3. Patterson Park
- Median Property Price: $232,700
- Property Price per Square Foot: $147
- Traditional Rental Income: $1,680
- Traditional Cap Rate: 3.4%
- Airbnb Rental Income: $2,370
- Airbnb Cap Rate: 4.6%
- Airbnb Occupancy Rate: 61%
Patterson Park is the up-and-coming neighborhood in Baltimore. This location gives its residents access not only to the beautiful urban park but also to the best restaurants, cultural activities, and nightlife options in the Baltimore housing market.
4. McElderry Park
- Median Property Price: $120,000
- Property Price per Square Foot: N/A
- Traditional Rental Income: $1,010
- Traditional Cap Rate: 3.3%
- Airbnb Rental Income: $2,180
- Airbnb Cap Rate: 9.0%
- Airbnb Occupancy Rate: 63%
The McElderry Park neighborhood is focusing on revitalization and explicitly looking for investors like you. Buying a traditional rental property there is an excellent investment option, considering the low property prices and the good cap rate.
With 2019 just around the corner, it’s time to decide on the best location to buy an investment property in the new year. Give the Baltimore real estate market some thought. It is probably not the first place you thought of, but it is among the best places to invest in real estate in the US at the moment. When you are ready to start looking for profitable investment properties in Baltimore, use Mashvisor’s rental property calculator and property finder to save time, money, and efforts while gaining access to the top performing investment properties across the US.