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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: rothwem on February 10, 2020, 06:18:25 AM
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TLDR crowd: Thinking of investing in Maryland real estate, skip to list below
I’ve got a rental house in NC that has nearly doubled in value, but the rents haven’t kept up. I’m contemplating selling it or doing a cashout refi, but I’m not sure where I would put that money (about $200k). I’d like to keep it in real estate, because I like the power of leverage, and I like the tax benefits. The rents in the region of NC where my rental is located have stagnated in proportion to property value, so I’m fairly certain I’m not going to put more money there.
So with that in mind, I’m looking out of state. The two main places I’ve looked are Shreveport, LA and Howard County, Maryland. These two places were mostly looked at because I have family there, my wife’s family is all in Shreveport, while my family is in Maryland. I’ve eliminated Shreveport as a contender because even though the buy-in is low, the rents are stupid low, like sub $1000 for a 3/2. My best guess is that there’s not a whole lot of industry there outside of oil and gas, and O&G is very cyclical.
That has me looking at the infill between Baltimore and DC. A 3/2 rents for ~$2200-2500, and I don’t think it would be insane to find a fixer upper for $200k that I can drop $30-50,000 on to make it nice. If I can pull in $500/month of cashflow after expenses, I'll classify it as an okay deal. The government is a large employer in the area (I’m the only one in my immediate family that doesn’t work for the gov’t or a gov contractor) and I don’t really think America is going belly-up very soon. Seems like a decent place to invest.
The things I’m not really sure of are:
-Local laws and regulations?
I grew up in Maryland, but I moved to NC when I was 17 to go to college. I’ve never been a grownup there, and I’ve never owned a house there. My parents own their home, but they’ve got super high salaries and don’t have expensive taste, so their perception of value is a bit warped. They’ve also never been landlords. What should I look out for? Extra taxes for out of state landlords? Odd tenant protection stuff?
-Contractors?
Around where I live, its nearly impossible to get any work done by anyone, there’s just a huge shortage of qualified contractors. Is the situation similar in Maryland? My dad won’t pay anyone to do anything on his house, so I don’t have a good feel for how hard it would be to hire someone for a home rehab.
-I don’t know what I don’t know?
Any other weird Maryland specific stuff that I need to be aware of?
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What do property taxes look like? If there are $200k places that you can get $2500/mo in rent for, that's one of the best remaining investment markets in the US, probably. So I'd check on the tax situation carefully (this assumes you find the kind of deals you think you will).
Otherwise I know zilch about Maryland, sorry.
-W
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What do property taxes look like? If there are $200k places that you can get $2500/mo in rent for, that's one of the best remaining investment markets in the US, probably. So I'd check on the tax situation carefully (this assumes you find the kind of deals you think you will).
Otherwise I know zilch about Maryland, sorry.
-W
Property taxes are 1.1% for the state, additional taxes vary from county to county.
$200k for a home is pretty optimistic, it'll definitely a garbage house rehab candidate. Comps in the area I'm looking at are $300-400k for a turnkey $2500/month rental. My thought is that a rehab will cost about the same whether its in NC or MD, but the home price will be higher, meaning less competition for the crap rehab candidate houses. Maybe that's misguided?
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Property taxes are 1.1% for the state, additional taxes vary from county to county.
$200k for a home is pretty optimistic, it'll definitely a garbage house rehab candidate. Comps in the area I'm looking at are $300-400k for a turnkey $2500/month rental. My thought is that a rehab will cost about the same whether its in NC or MD, but the home price will be higher, meaning less competition for the crap rehab candidate houses. Maybe that's misguided?
Sounds like more of a flipping market than a good rental market, honestly. But you're going to go have to put your boots on the ground and check out the properties, I guess. I'd be hesitant to buy super trashed rehab projects out of state unless I had a solid contractor team in place to do the work (or was willing to go live there and supervise). So you'll need to find those people as well (I'd say *before* you make any offers).
Good luck!
-W
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Walt nailed it with flipping instead of renting. You're not going to find a property that meets the 1% rule in Howard County. There are some opportunities to flip, but they aren't cheap either and require a lot of upfront capital.
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Walt nailed it with flipping instead of renting. You're not going to find a property that meets the 1% rule in Howard County. There are some opportunities to flip, but they aren't cheap either and require a lot of upfront capital.
Gah. No desire to flip here. Never done one, but it sounds like all of the worst elements of real estate rolled into one transaction.
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I don't see your numbers working in Howard County. $250k total for a property that generates $2500/mo is highly optimistic in the current market. I haven't had any issues finding contractors that perform (I'm a real estate agent so that may skew the answer), but they will probably be pricier than you are used to in NC.
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I don't see your numbers working in Howard County. $250k total for a property that generates $2500/mo is highly optimistic in the current market. I haven't had any issues finding contractors that perform (I'm a real estate agent so that may skew the answer), but they will probably be pricier than you are used to in NC.
Good to know. How many properties do you own in Howard County? Any hidden costs to think about besides the usual taxes, insurance and maintenance? I see that there’s a rental license requirement, but it’s $93 every two years, which doesn’t seem terrible. Are you required to have a realtor administer the rental contract?
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Columbia, which might be one of the only places in HoCo that you can buy a run down SFH in the $200's, has a CPRA tax (aka Columbia tax) to live in their great town. This is to help pay for the free parks and bike paths and some other nicer amenities that you can pay for.
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Columbia, which might be one of the only places in HoCo that you can buy a run down SFH in the $200's, has a CPRA tax (aka Columbia tax) to live in their great town. This is to help pay for the free parks and bike paths and some other nicer amenities that you can pay for.
Columbia is exactly where I'm looking, I didn't realize there was such a start difference in property values from there vs Ellicott City or Elkridge. Looks like the CPRA tax is 0.68%, which I guess isn't terrible. Thanks for the heads up though, even though I grew up in Columbia, I had no idea how the CA stuff was funded. I always assumed it was an extra income tax.