Hello World! Welcome Friends! The US housing market has been a behemoth over the last decade or so, slowly but surely climbing to heights as high as 33 trillion dollars in value. That figure doesn’t even include the value of the commercial real estate.
At the beginning of this year, though, things changed.
People started working from home. Legislation started making it acceptable to hold rent payments. Investors have been left scratching their heads wondering if they’re going to lose their holdings.
With all of that in mind, we ask ourselves, is the Baltimore real estate market worth putting money into right now? The answer to that question will depend on who you ask, but we feel that by looking at certain metrics associated with a good investment, you can come up with a fairly objective answer.
Here’s what’s worth considering…
1. Commercial or Residential?
When you consider if the Baltimore real estate market is worth tapping into, it’s helpful to be specific. For example, what kind of Baltimore real estate are you trying to add to your portfolio?
Single-families rentals? Office buildings? Apartments?
Looking at office buildings, given the mass exodus away from such structures as companies have been forced to work from home, it makes very little sense to scoop up that class of property right now. Rental homes, on the other hand, maybe more valuable as people downsize after getting hit by the down economy.
2. What Does Population Growth Look Like?
Any time you’re investing in a city, you want to get a beat on population growth. In a perfect scenario, you’re seeing an explosion in the population that has been demonstrated over a long period of time. In a bad scenario, population metrics would indicate that people are migrating away from the city.
Looking at Baltimore’s population movement, we’re seeing trends that suggest people leaving the city. There are other opportunity cities that are sporting much better numbers and maybe more worth your investment dollars into.
3. Is Crime Improving?
Crime is one of the primary things that will motivate you to rent/buy in an area or to sell your house fast. That’s why investors interested in the Baltimore real estate market should take the time to assess crime trends.
Looking at City-Data metrics, while certain years have fluctuated, we’re seeing a troubling rise in crime in and around Baltimore. As a matter of fact, the number of crimes being reported is among the most staggering you’ll find across major cities.
4. What Does Median Income Look Like?
It’s important to get a beat on how much money the average person in Baltimore makes. That data will give you a sense of how much you may be able to charge for rent and the likelihood you’ll face tenants defaulting on their payments.
As a rule of thumb, the closer tenants are to the poverty line, the more likely you’ll run into defaults on payments.
Again, referencing city-data, we see that the median household income of Baltimore is just over half of what it is for the rest of the state of Maryland. The per-capita income of Baltimore is under $30,000, which likely puts many of its residents below the poverty line.
5. Are Properties Outpacing Inflation?
While not a factor you’ll want to rely on alone in assessing real estate investment value, property inflation is a means in which investors can see returns. Therefore, it’s worth understanding the rate in which Baltimore real estate is appreciating.
Baltimore’s home appreciation rate was just over 1% over the last 10 years. That makes it one of the worst appreciating communities in the United States. When you compare that number to the average rate of inflation (3.22%), you end up upside down.
6. How Hard Is It to Get Construction Permits?
For commercial real estate investors that are looking at taking on multi-family units, the competition will be one of your biggest barriers when conquering vacancy. While you can look at currently standing complexes to assess competition, many forget to assess the potential for additional buildings.
If you were to buy an apartment building in an area that had three apartment buildings and three more got built that you weren’t expecting, that could kill your investment. So, it stands to reason that you should assess how easy it is to get building permits in Baltimore.
In Baltimore, building permit applications can be filed online. While that makes the process easier, getting approved is difficult.
Big cities are very particular about building in their limited space. That makes investing in these areas safer when it comes to new competition entering the arena.
Should You Invest in the Baltimore Real Estate Market in 2020?
We’ve hit you with a lot of elements you should assess when considering the Baltimore real estate market. With all of those cards on the table, is it worth taking the plunge into the city this year?
We don’t think so.
Baltimore, by most indicators, is not an exceptional city to invest in. In every major category, you could find better cities to place your money in that would likely yield better returns under traditional circumstances.
If you have an affinity for Baltimore, by all means, help the community by adding to it. If you’re in it for the money, though, keep moving until you see things like crime go down and incomes in the area go up.
For additional advice pertaining to real estate, we invite you to explore more of the newest content we have published in our blog!
Click the links below for any posts you have missed:
The Would-Be Woodworkers Guide
Common Foot and Ankle Injuries
How Long Does it Take to Build a Pool
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Toodles,
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