Top 5 Best Real Estate Investment Markets in Maryland

Many investors are asking themselves if now is a good time to get started with real estate investing in Maryland. It can be, if you buy the right property in the right markets.

Nicknamed Little America, Maryland has surprising variety for a relatively small state. Bordering four states and Washington D.C., Maryland has beautiful natural landscapes, quaint small towns, and bustling cities — and the best real estate investments in the state are in a mix of these areas.

Maryland real estate market overview

Maryland has a total population of just over 6 million and has historically grown about 7% every 10 years.[1]

Economically, Maryland outperforms the nation as a whole, maintaining a AAA bond rating and ranking as the most improved state for business in 2021. It's also a leader in biotechnology and is home to Fortune 500 companies like Lockheed Martin, Marriott International, and Discovery Communications.

According to the 2020 U.S. Census, Maryland had the highest household income in the nation at $94,384.[2]

With housing inventory still low, the Maryland real estate market remains tight and continues to favor sellers. With that said, there are still opportunities for investors to buy profitable real estate around the state.

What are the 5 best markets in Maryland to invest in real estate?

Deciding which market to invest in depends on what your goals are. What makes a successful vacation rental is not necessarily the same as a good buy-and-hold home.

Some investors focus on appreciation to avoid paying capital gains every year, whereas others like the steady stream of income that comes with solid cashflow properties. We've identified some of the best investment markets for multiple strategies below, but you can also use our rental property calculator to evaluate individual properties.

To find the best real estate investment market in Maryland, we compiled data across the state. We evaluated the increase in property values, affordability relative to average incomes, and profitability based on the average rents versus the cost to buy a house. The markets below scored some of the highest totals in the state when considering all three of these metrics. Learn more about our methodology.

» LEARN: Complete guide to getting started with real estate investing

Columbia: Best overall

Columbia is routinely ranked among the best small cities in America to live in and is only a short commute to Baltimore and Washington DC. It's actually divided into 10 different neighborhoods or villages, and each one brings its own charm and style to the city.

The quality schools, cultural diversity, and thrilling nightlife are just some of the many attributes that attract residents to this area.

With a median household income well above the national average and a rent-to-income ratio of only 18.7%, there is no shortage of tenants who can afford to rent your units — making this one of the best places to buy rental property in Maryland. And the average rent-to-mortgage ratio is a solid 73.7%, meaning there's a good chance you'll be cashflow positive despite the higher-than-average property costs.

The reasonable cost, desirable areas, and consistent growth in this city make it a well-rounded market for any real estate investor.

Baltimore: Best for beginners

In line with the rest of the state, Baltimore is a diverse city with a strong economy. With so many neighborhoods to choose from, there is plenty of variety to accommodate different approaches to investment real estate.

The relatively low price point makes Baltimore a good city for new investors, and a strong rent-to-mortgage ratio also means there's a good chance you'll make money right away.

If you're considering buying a short-term rental as your first investment, Baltimore's professional sports teams and many cultural attractions make this a profitable area to own property. Areas like Charles Village — where 78% of the population are renters — also allow for an effective buy-and-hold strategy.

Ultimately, the number of ways to make money as a new investor in Baltimore real estate is as diverse as the city itself.

Rockville: Best for flips

Many flippers look for cheap homes to renovate so they can turn a profit when they sell. Although this strategy seems incompatible with a market like Rockville — where the median home value is over $600,000 — this can actually be one of the best areas in Maryland for fixing and flipping homes.

Consider this: it costs about the same amount to renovate a 1,000 sq. ft. home regardless of where it is located. If you spend $40,000 on the renovation to make the home 25% more valuable, wouldn't you rather it be a $500,000 house in Rockville than a $200,000 house in Baltimore?

With its high property values but relatively low rate of appreciation, Rockville isn't necessarily a market to get rich buying and selling, unless you add some sweat equity to the mix.

With a solid rent-to-mortgage ratio of 72.3%, you have a backstop to avoid losing money if you rent out the house while trying to sell it. But at the end of the day, building in equity on the expensive homes you'll find in Rockville is a much more lucrative way to make money.

Frederick: Best for value

With solid stats across all real estate categories, Frederick offers Maryland real estate investors great value for a variety of investment approaches.

As the second-largest city in Maryland, Frederick is home to over 3,500 businesses and is among the highest in the state for population growth rate in major cities.

Between the consistently growing population and the military presence in nearby Fort Detrick, there is consistent demand for rentals in Frederick and the surrounding area. Recent efforts to revitalize the area have also created opportunities to buy into up-and-coming neighborhoods with great upside potential.

The booming economy, solid job market, and relatively affordable housing makes this a great value bet for anyone investing in Maryland real estate.

Hyattsville: Hidden gem

Sometimes great markets can hide in plain sight — such is the case for Hyattsville. With a population of just over 21,000, Hyattsville is a suburb of Washington, DC with immense potential in the real estate sector.

As our nation's capital, Washington, DC has no shortage of jobs, but it's often a very expensive place to live for people who work there. Fortunately, suburbs like Hyattsville offer a great alternative to overpaying for an apartment in the city.

With a median home value of $410,081 and an average rent of $1,440, Hyattsville is substantially cheaper than its neighbor and provides a great opportunity for investors to benefit from a smaller market in the orbit of a major metro.

Particularly promising is Hyattsville's population growth of over 20% between 2010 and 2020. If this trend continues, investors in Hyattsville real estate can have their mortgage paid by their tenants while benefiting from the appreciation that usually occurs in desirable, growing communities neighboring expensive markets like DC.

» LEARN: How to Buy a Second Home and Rent the First

How to find undervalued properties in Maryland

You may cash the big checks when you sell a property, but most of your return on investment (ROI) is determined by your purchase price. As such, you should do everything you can to get your properties at the lowest price possible. Below are some ideas on how you can locate and buy properties below market value.

1. Use investment software

Buying investment real estate is an inherently competitive activity. After all, you're not the only one who wants to make money buying great rental properties. With that in mind, you need to use every tool available to beat out the competition.

Using software like DealMachine can help you get an edge on the average homebuyer.

DealMachine's real estate software helps Maryland investors find and research distressed homes, and get in touch with owners fast via batch skip tracing and direct mail campaigns.

Download the DealMachine app for a 7-day free trial and a $15 credit for marketing costs.

Other technology that could be useful to real estate investors includes:

• Flipperforce: The Flipperforce app helps BRRRR method investors analyze home values to calculate the maximum purchase price to offer on a property before making a purchase.
• Stessa: Stessa's software allows you to easily track the performance and financial status of all your properties in one easy-to-use app. It provides regular reports on how profitable your properties are and can be linked to your financial accounts for automatic updates.
• Neighborhood Scout: This website is one of the leading market analysis tools in the nation, providing in-depth analysis of crime statistics, employment data, and appreciation rates at the neighborhood level.

2. Invest in foreclosures, auctions, and off-market properties

Unfortunately, there's a price to pay for the convenience of finding properties on the MLS or Zillow: everyone else is looking at those same properties. All that competition inevitably results in higher prices and closing fewer deals.

One way to circumvent this problem is to look for deals in less obvious places. Foreclosures and real estate auctions are one way to locate distressed properties that might be the diamond in the rough you're looking for. Seeking out other off-market properties can also be a good way to find your hidden cash cows.

» MORE: How to buy a foreclosure in Maryland

If you're not interested in or not able to do the work yourself to renovate a property, you can use HomeAdvisor to solicit quotes from up to four local professionals to compare rates for high-quality service.

3. Partner with an investor-friendly agent

Working with a top agent who is an expert in the local market is a tried-and-true way to consistently find good deals and negotiate like a pro — because that's what they are.

Besides understanding local trends in real estate and knowing which areas to target and avoid, great agents also know how to locate deals before other buyers get to them. They can also alert you to laws and regulations that may impact your decision on which properties to invest in.

Working with a Clever agent means you'll have a top, local professional on your side, and you may also be eligible for cash back on your purchase after closing!

Methodology

Using data from the U.S. Census Bureau and Zillow, we've compiled median home values, average household incomes, median homeownership cost, and median rents to evaluate the real estate market trends for cities all over the nation. We then scored each city on appreciation, rent-to-income ratio, and rent-to-mortgage ratio to determine which cities were most profitable and affordable for real estate investors.

The cities with the highest total scores were then evaluated on less quantifiable information like economic diversity, quality of life, and desirability of destination to determine the top five markets in each state. We broke these markets down into five distinct categories to account for the various goals and approaches to real estate investment our readers may identify with.

Frequently asked questions

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