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Small Investors Take a Crack at Baltimore’s Rental Market
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January 14, 2013
The foreclosure crisis has put more people than ever on the street, looking for a place to rent. It has sent the rental vacancy rate in Baltimore plummeting to less than 7 percent, according to The American Community Survey of 2011. Other sources have it even lower.
Mary Rose Madden has this story about one entrepreneurial team that set out to take advantage of the buyer’s market AND the demand for rental units.
Mary Rose Madden: Meet Tighe Greenhaul and Kyle Jacoby. Two young private investors – both 30 years old. During the recent housing boom that peaked in 2006, they flipped properties. Now, Greenhaul says they’re looking to maximize on the recent housing trend.
Tighe Greenhaul: We saw it as a time when more people would be renting properties just because it’s a tougher time to own a house.
Madden: Greenhaul says their plan was straightforward – they’d reach out to landlords who lived out of state and make an offer to buy the tenant-occupied property. After a few letters and a few bites, an owner living in West Virginia called them back accepting the offer for his row homes in the Curtis Bay neighborhood.
Greenhaul: We bought them sight unseen – as a package of six.
Madden: The owner said he didn’t want to disrupt the lives of the tenants by giving tours of their homes to outsiders. The young entrepreneurs moved ahead, anyway, buying the houses for $20,000 each.
Greenhaul: We thought if someone was living in them then they were in livable conditions. But that’s not always the case.
Madden: And it wasn’t long before a tenant called them with a complaint. And that leads us to today.
Wind chimes dangle from porches on a small side street in Curtis Bay. Ravens paraphernalia decorates the windows of the narrow row homes. And the two new landlords are standing outside.
Madden: “What are we doing today?”
Greenhaul: “We’re walking through with our contractor to get an estimate of the cost of fixing this one up.”
Madden: Matt Brimigion is their general contractor - he has his hands full in Curtis Bay.
Matt Brimigion: “This home here we would end up taking everything down – including most of the walls, the ceiling, we would leave the stairs in tact, the floors are un-level and stuff like that, so.”
Madden: The floor is so un-level, one can easily trip. The ceiling is falling in, the walls need a fresh coat of paint, and sat least some of windows do not open. The renovations were so massive that the tenants needed to move out before rehab could start. Brimigion expects the renovations to cost anywhere from 15 to 20,000 dollars.
But even with this pricetag on the renovations, the new landlords are still happy they invested.
Analysts say more and more small investors like Greenhaul and Jacoby are recognizing the time is right to buy in Baltimore, if you can get the loan.
Marcelline White: It’s a fire sale.
Madden: That’s Marcelline White. She’s the executive director of The Maryland Consumer Rights Coalition.
White: Before the subprime mortgage meltdown, we saw a lot of flipping. I think we’re seeing that same kind of process at work now with renting because there’s a demand now that wasn’t there a few years ago.
Madden: White says these trends show how Baltimore’s rental market has been affected by the foreclosure crisis.
White: What we have been hearing is that prices for rentals are going up as people are losing their homes- people have to live somewhere - so they’re looking at rentals. So, it’s caused rental rates to increase dramatically.
Madden: The American Community Survey shows Baltimore rents have increased by almost 100% over ten years. The average rent was just 600 dollars in 2000 and almost 1100 dollars in 2011.
Greenhaul and Jacoby raised the rent on their properties only by 50 – 100 dollars a month, after the renovations. They say a happy tenant is a good tenant. Jacoby says the process of becoming a landlord has been full of surprises.
Kyle Jacoby: “It’s been a pretty wild experience. You gotta know there’s gonna be risks. It’s not for everybody, you know?”
Madden: The rental market has been squeezed by the foreclosure crisis among other things. With a low vacancy rate and rising rents, the concern over affordable housing grows.
I’m Mary Rose Madden reporting in Baltimore for 88-1, WYPR.
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