Investing In Maryland Real Estate
Updated: Aug 30, 2019
Maryland is an excellent state for investors. Baltimore in particular ranks as one of the best cities for investors with the ROI sitting at about 96.6% and the average flip taking about six months. While real estate is often a very good investment, there are a number of things to take into consideration before you start investing.
Consider Rental Properties. Cash flow is important. Many investors jump right into flipping, but rental properties are lower risk in a downturn and can be an excellent source of income. Flipping houses can be exciting, but flipping is deceptively difficult. Rental properties are often a steadier investment. There are a number of excellent towns for investors in Maryland. Consider buying a property near a college or university for a constant influx of potential tenants.
It is important to keep in mind that property management is a JOB. Tenants can be destructive so you must screen them carefully and keep a close eye on the property. This serves to protect your investment so if you aren’t prepared to act as a landlord, be sure to budget for hiring a property management firm. If the property has existing tenants, read the leases carefully as you will have to honor them regardless of what your plans are for the property.
Crunch The Numbers. A detailed budget is essential. You need to know your numbers and stick to them. Besides the obvious costs for purchase and repairs you need to keep in mind things like general upkeep, city taxes, capital gains taxes, and the possibility of reassessment. Keep an eye on the neighborhood. What are the trends? What will your ARV (after repair value) be? How much wiggle room do you have? If the cost of repairs increases unexpectedly (as it often will) or if the price drops, will you still make a profit? Be aware that you can often delay paying capital gains taxes if your profit is going directly into another investment.
Be sure keep your personal preferences out of it. An investment property doesn’t need to be your dream home. In fact, mediocre homes often make the best investments. Instead, focus on how much it will cost to buy and repair the property and how much you can sell or rent for. Even if you plan to rent the property, be sure you can afford to pay the monthly mortgage payments if a tenant stops paying or if there is a period of turnover.
Start Small. It takes time and experience to learn the ins and outs of investing in real estate. Don’t throw your life savings away and start living out of your car to buy your first property. For your first foray into investing in real estate, your goal should be to find a property with low operating costs and manageable repairs in a neighborhood where investors have had success.
Do Your Research. You need to know your market. Not just the interest rates and rent costs, but statistics such as unemployment and crime. Is the market in that neighborhood steady or is it up and coming? Take note of what other investors are doing and find out what is working in the neighborhood you choose to invest in. It is often fairly obvious which renovations buyers are going for and you should copy them, but be smart about it. Certain renovations will never be worth the cost and while you want to make sure your renovations are quality, it isn’t often necessary to choose top of the line options for every single repair and renovation you make.
Build Your Network. This is crucial. A good contractor can make or break your flip. A good agent can find you the perfect property. A good property manager can protect your investment long term. Make sure to start building your network ahead of time so you don’t end up with a weak team. Sitting down with a real estate investment advisor ahead of time can also save you a lot of trouble down the road.
Ultimately, your strategy will depend on your location and your priorities. Not every investment strategy will work for you. On the whole, real estate tends to appreciate over time, but houses in certain neighborhoods will do so faster than others and this will affect which route you choose. Investing in real estate can be fulfilling and lucrative if you take your time and get it right.