7 Reasons Why It’s a Great Time to Invest in Maryland Rental Properties

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If you’re interested in becoming a property owner in Maryland, I have some exciting news for you:

Now is a great time make it happen.

More and more people are opting to rent rather than own due to the high costs of home ownership, the desire to change location frequently, and various other reasons. On top of that, millennials have abstained from home ownership for longer than previous generations did at their age, so a lot of them are looking for places to rent.

However, that doesn’t mean you can just start investing in random rental properties and expect to become an overnight success. Some markets are much more lucrative than others, and you need to pick the most lucrative markets (like Maryland) to start and run a highly profitable rental property business.

Now, you may be wondering:

Why is right now such a good time for me to purchase Maryland investment properties?

Keep reading to find out.

 

Why It’s a Great Time for You to Become a Maryland Landlord

1. Data shows that Maryland is currently a great place to invest.

Not only is Maryland full of potentially profitable rental properties – recent research that compared gross rental yields in many different cities showed that Baltimore City, Maryland had the highest annual gross rental yields at 28.5%.

The same research cited zip codes 21223 and 21205 in the Baltimore area as being top zip codes for single-family rental returns. The Baltimore Sun even noted that it can be cheaper to buy than it is to rent in the Baltimore area, which is great news for landlords looking to invest.

On top of that, you can find many Maryland investment properties in college towns like Baltimore City, Towson, or College Park. This is an attractive market for landlords because young people attending school often prefer to rent rather than buy.

Bottom line: If you’re thinking about investing in rental properties, you need to start looking around in Maryland – especially the Baltimore area!

 

2. Rental properties help you diversify your income streams.

Think about it – what would happen if you suddenly lost your day job or one of your main income streams?

Chances are, you’d take a huge financial blow. You might even struggle to pay your bills if you were fully dependent on the income stream you lost.

That’s why it’s a good idea to diversify your income streams by purchasing Maryland investment properties.

When you invest in rental properties, you gain a new source of income. Not only does that enable you to make more money it allows you to gain peace of mind knowing that you’ll be able to get by financially, even if you lose one of your income streams.

 

3. You can save for retirement (or something else!).

When you own a profitable rental property business, you don’t have to rely solely on your 401K account to start saving for retirement. You can raise your rents as your property values increase over time to build long-term wealth and make sure that you have plenty of money to retire on.

 

Related reading: How to Fund Your Retirement with Rental Property Income

 

4. Rental properties tend to be stable, depression-resistant investments.

Even when the economy is struggling, people need a place to live. And when times get tough, they probably aren’t going to want to splurge on a mortgage – they’re going to rent instead.

Of course, rental property investing isn’t a foolproof way to make a lot of money. You have to be careful about the tenants and properties you choose if you want to make it work. But once you learn how to do that, there’s a good chance you’ll have a stable source of income for a long time!

 

5. You can become completely self-employed.

Maybe you’re thinking about becoming a landlord because you want to quit your day job. You dream of the freedom associated with being self-employed, and you’re ready to become your own boss.

It’s true that becoming a landlord can allow you to do that. When you run a rental property business, you get to call the shots in every aspect of your business. Self-employment also gives your personal freedoms, like the ability to set your own work schedule and vacation dates.

Of course, you won’t be able to take a vacation any time you want – you’ll still need to get organized and set regular work hours so you can take care of your tenants and properties unless you hire a property manager to run your rental property business for you.

 

6. You become exposed to new networking opportunities.

You’ve probably heard this saying before:

“It’s not what you know – it’s who you know.”

That certainly seems to be true in the business world. Often, you can majorly benefit from utilizing your connections and social networks.

Fortunately, when you become a landlord, you can meet all kinds of new people, like:

  • Bankers
  • Real estate agents
  • Tenants (some of whom may have professional connections you can benefit from)

So if you decide to take the plunge into rental property investing, get ready to start networking and make the most of every opportunity. Who knows – you might just find yourself connecting with someone who can help you make your rental property business more profitable than ever!

 

7. Investing in rental properties can be semi-passive income.

Don’t get me wrong – owning a rental property business can be a demanding job if you go at it alone. You cannot simply purchase properties and collect a check every month. You have to handle maintenance and other tenant requests, deal with late rent payments, screen tenants properly, advertise your rental properties effectively, and more if you want to be successful.

However, you can turn your Maryland rental property investments into a source of semi-passive income by hiring an experienced property manager.

When you hire a property manager, they’ll relieve you of stressful, unwanted landlord tasks so you can take a more “hands-off” approach to your rental property business.

To learn more about how Maryland property management can help your business grow, contact Bay Management Group today.

 


Should You Invest in Long-Term or Short-Term Vacation Rentals?

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If you own a rental property in a prime vacation spot, you have probably questioned whether it is better to lease your home to as a short-term rental to those on traditional vacations or on more of a long-term basis.

Independent property owners and property management groups looking to lease out rental properties for varied lengths of time should consider many factors such as cash flow, property turnaround and usage, as well as maintenance, to name a few.

Today, we will look at both types of rentals to help you make the best decision for you and your rental business.

 

What is the Difference between Long and Short-Term Rentals?

When people refer to “vacation rentals,” they are typically talking about short-term rentals.  Usually leased on a weekly basis, short-term rentals are rented to those looking to stay for a small period of time and leave.  Holiday getaways, family vacations, and honeymoons are all instances where a tenant may lease your vacation property for a few weeks at a time.

On the other hand, a long-term rental is a more permanent living situation.  Long-term vacation rentals are normally for those escaping seasonal weather for 4-6 months at a time.  For instance, your tenant may take an extended “vacation” and lease your Florida during the cold Minnesota winter months.

 

Long-Term Vacation Rental Pros and Cons

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Leasing your vacation home long-term lends itself to many benefits:

  • More consistent cash flow since tenants are contracted to stay for months at a time.
  • Less turnover due to longer lease terms.
  • Responsibility of utility payments fall on tenants.
  • Collection of a security deposit for damages, much like with a traditional rental agreement.
  • Higher possibility your tenant will have their own furnishings due to the longer stay.

 

However, there are also some downsides to leasing your property long-term as a vacation rental:

  • Less flexibility when it comes to using your own property as a vacation getaway.
  • Poor tenant placement can affect your bottom line and cause landlord-tenant disputes.
  • Stricter landlord-tenant laws for things such as inspections and squatter situations.
  • Higher HOA fees and more restrictions because of prime location as a vacation rental, regardless of lease lengths.

 

Short-Term Vacation Rental Pros and Cons

Just like long-term vacation rentals, short-term vacation leases have many benefits:

  • Rental rates can be set drastically higher than traditional rentals, especially if the property is located in a high demand area.
  • Less maintenance and wear on your property since tenants are simply “visiting” and will not be making your property their home by redecorating.
  • More flexibility when you want to use your own home for vacations.
  • Potential tax breaks including income reporting and operating/advertising deductions.

 

On the other hand, there are some cons to consider if you are looking to rent your vacation home short-term:

  • Hidden costs such as utility payments, external grounds maintenance, furnishings, advertising, and annual fees associated with the property such as HOA fees.
  • Extreme competition with surrounding properties that can dip into your positive cash flow or leave you with an empty rental.
  • Some community restrictions such as limiting short-term rental stays to 30 days or less.
  • Constant upgrades to make your home desirable for those on vacation rather than living day-to-day.

 

Final Thoughts

In the end, whether you decide to lease your rental property long or short-term there are significant things to consider.  Things such as your financial goals, the responsibilities you are willing to take on, and your own personal preference will help dictate whether your property is suited more for the casual vacationer or the lengthy snowbird “vacationer.”

Have you used your rental property as a vacation rental?  Do you lease long-term or short-term and why?  I would love to hear all about it in the comments below!

 


How to Create a Rental Property Business Plan that Sets You Up for Success

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Do you own a house or apartment building that you can rent out to tenants to generate income?

If you answered yes then you should jump at the opportunity.

Becoming a landlord is a fantastic decision for anyone who wants to create an income stream for themselves at any point in their lives. But if you want to go down this road, you’ll need a solid business plan.

Keep reading to learn how Montgomery County property managers and landlords can set goals and create a business plan that helps them achieve success.

How Landlords Can Create a Rental Property Business Plan

Establish a System

Being a landlord makes you a business owner, and you need to treat your business like more than a hobby. Depending on your tax status, you have a few options for establishing your business.

Most rental property investment companies are setup as LLCs. LLCs allow you to legally separate yourself from any business related liability in order to protect personal property and finances in the event of a lawsuit or other legal issues.

It would be wise to seek the advice of a business attorney who is experienced in matters that concern LLCs. Before you complete any paperwork you should consult a financial advisor who can advise you on all of your incorporation options.

You want your business to run like a well-oiled machine. That means establishing clear-cut routines that make everyday tasks straightforward and easy to manage.

You also need to be consistent.  To stay motivated and be consistent, you need to determine your endgame – your ultimate vision.

Understand Your Vision

What do you intend to get out of being a landlord?

Maybe you want to pay off your properties or other debt. Maybe you want to accumulate additional properties to increase the size of your rental property business.

Or maybe you want to earn a specific amount of money every year to properly enjoy your retirement.

Some landlords opt to start small and steadily increase the size of their rental operation. Others choose to partner with a wealthier individual to purchase more profitable properties.

Don’t over-extend yourself, but realize that the larger your initial investment, the larger your potential profits. Whatever your vision may be, you need to clearly visualize it. Everything you do as a landlord should move you closer to realizing that vision.

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Understand Your Finances

To be a successful Montgomery County landlord, you’ll have to know where the numbers come from.

First, you should define your market. What sort of properties will you be investing in and what types of tenants are you interested in leasing to– low income, high income, or commercial properties?

Unless you’re independently wealthy, you’re going to have to find a way to pay for your rental properties.

What sort of money will you be using to secure them – conventional, hard money, private money, equity partners, seller financing, lease options, or some other method?

If you plan to take out loans to buy your properties, lenders will want you to have an exceptional credit history with no history of foreclosures or evictions and a dependable  source of income.

When creating your business plan, you should include a personal description of your day-to-day finances. What do you bring to the table? Are you starting from scratch?

Remember that any time your financial situation changes, you should update your description in your business plan. As you evolve as a landlord, it’s important to have your complete financial statement at the ready.

Prepare for Problems

One inescapable part of being a landlord is problem tenants and surviving the eviction process.

Most tenants will gladly pay the rent and treat the property like their own. They’ll treat their neighbors with respect and avoid giving you too many headaches.

But at some point you may have to intervene and get your hands dirty. Renters may damage your property or break any the rules you established in their lease agreements – and you’ll have no choice but to evict them.

Learn your state’s landlord and tenant laws regarding eviction in advance. Typically, you’ll need to go to your local court, file a notice, schedule a court date, and be ready by that date.

However, there may be many extra obstacles in the way of a clear eviction, so be sure you know how to avoid common mistakes landlords make during the eviction process.

Many of these issues can be avoided by choosing the right tenants every time.

Create a Daily Plan

Being a successful landlord requires day-to-day involvement. In order to maximize your daily efforts, you should break down your grander vision into smaller pieces that allow you to work towards your long-term goals efficiently.

Sometimes your days will revolve around ensuring your rental properties are full. Because vacancies are one of the biggest costs associated with being a landlord, you need to be sure to find and keep good tenants.

Everything you do needs to play into your overall plan. Commit each day to working on strengthening and expanding your business, and make sure you track your progress. Before you know it, you’ll be a successful Montgomery County landlord.

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Get Professional Help When You Need It

If you intend to become the property manager of your own rental properties, you will need to consult a real estate lawyer to establish a proper lease. You’ll employ plumbers, electricians, and other contractors as well.

If you decide to expand your business, you’ll likely reach a point where you can’t (or don’t want to!) handle all the work yourself, so you’ll need to build relationships with trusted contractors. These relationships take time to build, and it can become challenging to scale your staff and connections along with the size of your operation.

A Montgomery County rental property management company can inspect your properties regularly, take those late-night tenant calls you want to avoid, and keep your business running smoothly.

Sure, you’ll still want to keep an eye on things, but the majority of your stress will be lifted.

Look over your business plan – do you think you need a property management company you can trust to help you build and manage your rental property business?

If so, contact us today. We can handle all your unwanted tasks, and provide you with all the feedback (and stress relief) you need to grow your business – your way. We serve multiple counties in MD and PA including Philadelphia, Baltimore, Washington DC and nearby.


5 Questions to Ask before Investing in a Vacation Rental Property

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According to the National Association of Realtors, in 2015 an estimated 1.09 million vacation homes were purchased for investment reasons alone.  Representing an increase for the first time in 5 years, it might be time for you to consider investing in a Prince George’s County vacation home that you can lease to tenants looking to enjoy a long vacation.

There are many reasons why people may be drawn to leasing your rental home for vacation purposes, whether long-term or short:

  • More available space than a hotel room for large families or groups of people
  • The opportunity for longer stays at a more reasonable nightly rate
  • Extra privacy away from other vacationers
  • The livability factor – appliances, furnishings, stocked kitchen, and more
  • Avoidance of winter or summer months, depending on preferences
  • Local living (i.e. experiencing the culture a small town like Laurel provides visitors such as state parks, historical roots, art galleries, and annual festivals)

Today we will look at some of the important considerations surrounding a vacation rental investment to help you decide whether leasing a vacation home is right for you or not.

 

Top 5 Considerations before Buying Vacation Rental Properties in Maryland

1. Is It Legal?

Before investing in a rental property you plan to later lease as a vacation home, it is important you check with your state and local laws regarding short-term lease agreements.  Some zoning laws and homeowner’s associations will put minimum stay requirements on lease terms and some will even go so far as to not allow any leasing of your home to strangers.

Take the neighboring Montgomery County for instance.  As of October 29, 2014 it was made illegal for any homeowner to lease their residence for 30 days or less in all residential zones.  This means that landlords using their properties as vacation rentals or anyone using the popular Airbnb service for extra income are violating the zoning code if tenancy lasted under 30 days.  This also means they are subject to the penalties that come with those violations

Recently, there was a push for an amendment that would allow all forms of short-term rentals to be legal in Montgomery County but you must be careful before you lease your residence as a vacation rental to avoid legal trouble.

 

2. Can You Afford It?

As with every major purchase, you must balance the cost versus the return.  Since real estate is not a liquid asset, you must consider the fact that it may not sell for a profit should the need arise.

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In addition, more so than with normal rental properties, there are associated fees to pay whether the home is being rented or not, including:

  • Utilities
  • Homeowner’s association fees
  • Property taxes
  • Insurance
  • Furnishing
  • Repairs
  • And so much more

 

3. Do You Have a Business Plan?

Leasing your Takoma Park rental property as a vacation rental takes the same amount of work that any normal rental property does.

  • Advertising of your property’s availability on a regular basis
  • Thorough tenant screening
  • A lease agreement or contract detailing the rules for occupancy
  • Collection of payment
  • Inspections and walkthroughs to ensure no damage is being done to the property
  • Appealing to tenants that want current market trends and fancy vacation homes
  • Cleaning in between tenant stays
  • Handling of bookings and dealing with cancellations

In the end, leasing your home as a rental actually becomes more work because there is far less responsibility placed on your short-term tenants.

Unlike a more permanent living situation where your home is made to feel like their own, and where certain responsibilities are clearly defined as your tenant’s duty, vacation rentals are more luxurious and casual for tenants.  Being prepared for this is a must.

 

4. Is it Protected?

Since the influx of tenants in and out of your rental property will be more than the normal rental property turnover, there is bound to be an increase in vacancies.

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Be sure to protect your vacant rental as you would any other property you lease.  Try to make it look as though someone is occupying the property to avoid trespassing, vandalism, and burglaries and conduct regular visits to ensure your property is safe.

 

5. Is it Vacation Ready?

Vacation rentals are supposed to come as a complete package.  It is your duty to make it feel like home rather than like a hotel so that tenants will enjoy spending their down time there and hopefully return as repeat customers each season.

Here are some great ideas for not only furnishing your property for everyday living, but for making it feel extra special for those on vacation:

  • Include daily cleaning supplies, a mop and vacuum cleaner, as well as things like replacement light bulbs.
  • Decorate – hang artwork or photography on the walls, add throw pillows to the couch, or place flowers in the kitchen. It’s the little things that will make a difference.
  • Include hangers in the closet and ensure that the dressers are free and empty. Vacationers want lots of space, especially in a vacation home.
  • Have books, magazines, and even board games for your vacationers to enjoy – it is a vacation after all!
  • Include TVs, DVD players, radios, and clocks.
  • Provide bedding and linens.
  • Consider providing local tour guide information so your tenants can visit the hotspots.
  • Take it one step further and provide a “Welcome Book” for your tenants to refer to.

In addition to making your Bowie property look nice on the inside with décor, it is crucial that you clean it from top to bottom for the next tenant regardless of how long your previous tenant stayed.

Consider hiring a cleaning service so that you don’t have to take that task on yourself.

Remember, this is not a typical rental property where you can require your tenants to thoroughly clean your home.  While a general sweep up is reasonable, don’t expect anything more than that.  You don’t clean your hotel room when you leave do you?

 

Final Thoughts

Owning a great rental property and leasing it as a vacation home can be very lucrative, but there is a lot to consider.  Just because the lease terms are shorter doesn’t mean there is any less work to do.

In fact, you may notice more work is involved due to a higher turnover rate and more landlord responsibilities.

If you are considering leasing your Prince George’s County home as a vacation rental, and need help with all aspects of managing the property, call Bay Management Group today and see how they can help.

As one of the leading property management companies in Maryland, Bay Management Group can help you with everything from screening your tenants, to drafting a lease agreement, to payment collection, and more.

Take your own vacation from property management and let Bay Management Group handle all of the challenges associated with making sure your vacationing tenants are happy.