The city of Baltimore has long been an overlooked market for real estate investment, but recent trends show this is starting to change. With improving city infrastructure, a growing jobs market, and rising property values, Baltimore real estate presents an excellent opportunity for investors who get in early. In this article, we will explore tips for successfully investing in Baltimore real estate across property types and neighborhoods. From calculating returns to leveraging incentives, you will learn key factors to consider when adding Baltimore investment properties to your portfolio.
Consider Baltimore’s Revitalization and Market Trends
Over the past decade, Baltimore has experienced a resurgence through city revitalization efforts. Billions have been invested into transportation, housing, parks, and commercial development. Neighborhoods like Harbor East, Federal Hill, and Hampden have seen private investment pour in. As a result, the population has stabilized after decades of decline and the housing market is strengthening. Home values in neighborhoods close to major employers like Johns Hopkins are rising quickly. Rents are also climbing faster than the national average, signaling landlord demand in the area. Investors who buy rental properties now can take advantage of accelerating appreciation and rents over the coming years as Baltimore continues to turn itself around.
Target Emerging and Appreciating Neighborhoods
While established neighborhoods can provide stability, investing in up-and-coming outer neighborhoods of Baltimore can lead to higher returns. Areas anchored by major developments or employers are strong prospects. For example, Park Heights is set to benefit from a major redevelopment project including hundreds of new and renovated homes. The success of projects like Port Covington and the redevelopment of the downtown shoreline also promise to lift surrounding communities. By getting in early before widespread gentrification, investors can secure properties below market value before appreciation gains momentum.
Understand Property Tax Credits and Incentives
Baltimore offers a number of incentives to boost real estate investment in the city. The Homestead Property Tax Credit caps annual property tax increases at 4% for owner-occupied primary residences. This helps shield homeowners from rising values. The CHAP tax credit freezes property taxes for up to 10 years for renovations made to historic homes. For landlords, Passive House Tax Credits up to $5,000 are available for energy efficient upgrades made to rental properties. Understanding and utilizing these credits allows investors to reduce expenses and increase returns.
Factor in Reasonable Repair Costs and Budgets
Many properties in Baltimore require renovation and repairs, which make them attractive wholesale or value-add acquisitions. However, repair costs add up quickly, so conservative budgeting is key. Expect to spend $50-100 per square foot updating things like kitchens, bathrooms, electrical, plumbing, and HVAC systems in older homes. Budget 15% extra as a contingency for unforeseen issues that arise. By sticking to a realistic budget, you can avoid over-improving properties relative to the neighborhood.
Leverage Retail and Commercial Opportunities
Aside from residential properties, commercial real estate can also be a lucrative segment to target in Baltimore. The downtown office vacancy rate has fallen to 10% in recent years, showing rising demand. Average retail rents are also rising quickly around Johns Hopkins campuses and other growth nodes like Canton. With corporate relocations and store expansions underway, mixed-use retail and office spaces represent profitable investments catering to a resurging job market and student population.
With improving fundamentals and market momentum, Baltimore real estate presents a compelling investment opportunity. By strategically targeting appreciating neighborhoods, leveraging tax incentives, and factoring in realistic rehab costs, investors can capitalize on this emerging market while managing risks. As Baltimore continues to rebuild and transform itself, those who invest now will be well-positioned to ride the growth in years to come.