Before you invest in any rental property, it’s important to research potential communities so you not only find a property that’s great, but you also find an area that’ll be attractive to future renters. Baltimore is a city that’s rich in diversity, which means each of its communities can vary greatly from one neighborhood to the next.
If you’re on the hunt for a great investment space in Baltimore, Middle River, Essex, and Dundalk are among the best areas to purchase and manage rental properties. The tenants in these areas seem to stay in their rentals for a much longer period of time than other places around town, such as Federal Hill, Canton, or Fells Point. This is important because high turnover costs in the investment property business can quickly eat into your profits. Areas with high tenant turnover mean you’ll likely be facing the task of finding new renters every year or two. Conversely, people tend to stay in Middle River, Essex, and Dundalk rental properties for an average of five to seven years, meaning you won’t have to keep investing in advertisements, background checks, and all the other expenses that come with obtaining a new tenant every time the calendar rolls over.
It’s also important to examine the average rental prices in your potential investment areas. You’ll want to make sure you’re able to purchase a rental property at a price that makes sense without putting yourself out of business when renters see the price tag you’ve attached to the place. This is a balancing act that can take a little finesse and experience, but due diligence will definitely pay off.
How Turnover Costs Impact Investment Property ROI
If you have to turn your property over every year or two, it’s going to cost you a lot more than if you only have to search for new tenants every five to seven years. If you’ve never thought about how much work actually goes into preparing a rental for a new tenant, you might be surprised to see how long the checklist really is. Of course, each task on the to-do list is going to involve time and money.
Each time you need to rent your property you’ll need to:
- Thoroughly clean it
- Replace the carpets
- Paint the interior and possibly the exterior
- Repair damages to the walls, window coverings, appliances, and anything else that’s not in ideal condition
- Change the locks
- Advertise the unit
- Run background and employment checks
Of course, this is all just standard maintenance. If you had to evict the prior tenant from your Baltimore rental property, you’re also looking at the costs associated with lengthy court processes and the cost to repair the additional damage that more than likely occurred within the property.
All of these items cost money, which, in turn, leads to less profit. It’s ideal to have tenants stay in your property as long as possible so you can forego turnover costs that eat away at your bottom line. It makes your property manager’s job easy, and it saves you a lot of money in the long run.
How the Cost of Your Property Impacts Rental ROI
The cost of your ideal property isn’t the only thing to consider. Of course, it’s an imperative piece of the puzzle, but the price alone is just one of many factors that’ll determine the ultimate value of your investment. You can purchase a rental property in Dundalk, for example, for $100,000 and rent it out for $1,100 to $1,200 a month. Essex and Middle River offer similar pricing opportunities. You should easily be able to achieve a rental price that’s well over 1% of the cost of the house.
If you were to opt for Federal Hill or Canton, however, the average purchase price is significantly higher, but the rental prices don’t correlate. For instance, if you purchase a property in Federal Hill or Canton for $200,000, you won’t be able to rent it out for $2,400. Instead, you’re most likely looking at rental rates between $1,600 and $1,700—well under the ideal 1% goal.
The cap rate is much higher in areas like Middle River, Dundalk, or Essex. Remember, it’s not just about how much the property costs and how great the neighborhood is; it’s about appealing to potential renters in areas where they’ll see the most value for their money, too.
How Communities’ Personalities Impact Investment ROI
Interestingly enough, communities have personalities. We’re not necessarily talking about areas that are kid-friendly versus those that are ultra-urban. Rather, we’re talking about the types of people who tend to gravitate towards certain areas, which ultimately determine the landscape for landlords.
As an example, if you purchase a rental property in Essex, you’ll likely find that people there are less demanding than many other areas around the city. Dundalk and Middle River also tend to be occupied by pretty low-key people who are easy to manage (as far as their rental properties are concerned). Low-maintenance renters are an investor’s dream; the less you have to send your maintenance tech to the property, the more money you’re keeping in your own pocket.
Almost any Baltimore property management company will agree you’ll see a higher ROI in Dundalk, Essex, or Middle River. These are highly desirable areas for great tenants who want to stay in their rental properties as long as possible without asking too much of their landlords. What more could you ask for?
Learning How to Ask the Right Questions
Investing in property throughout Baltimore can be tough. Even if you were born in the city and know the neighborhoods inside and out, the game changes when you’re ready to be a landlord. There are nuances involved with investment property you’ve surely never thought about before. It’s important to ask property management companies in Baltimore which areas they would buy property in if they were using their own money. Let the answer be your guiding key as you decide on the right property. Bay Management Group believes Dundalk, Middle River, and Essex will give you the highest ROI on rental properties across the greater Baltimore region.
Bay Management Group is Baltimore’s go-to resource for property owners who want to make the most of their investment. Whether you already have your heart set on a rental property in Middle River, or you’re just not sure where to look right now, our experts will be happy to offer our guidance. Reach out to our team to learn how we can help you achieve positive ROI with our dedicated team of property managers and outstanding customer service!