There's an old saying in the real estate business: Today's renters are tomorrow's homebuyers. And it seems that the adage applies to Baltimore now more than ever because these days the city is appealing to renters more than ever.
New, trendy apartments in Baltimore are offering more than just fresh paint and new appliances. Rental developers are investing the kind of attention to detail that is usually reserved for ownership.
Renters can find New York-style lofts in Federal Hill, with beautiful high ceilings, sound-dampening windows and sleek open spaces. In the central business district are older, rehabbed buildings that maintain original architectural trimmings.
But with the extras come higher rents. Tenants can be expected to write monthly checks ranging from $1,200 to $3,000 for places that they will never own, never acquiring equity or getting a chance to capitalize on their investment.
The principal and tax-deductible interest on a $200,000 mortgage at 7 percent amounts to $1,330 a month. For that price, according to real estate agents at the Fells Point office of Long & Foster Real Estate Inc., a four-bedroom, 2 1/2 -bathroom home in Fells Point listed for $205,000 is within reach.
So why rent in Baltimore?
For many people, it's not just economics. It's lifestyle.
According to experts in the field, renters are just not ready to buy. Many are young or recently out of college or have relocated to a new job. They want to get to know the city before handing over a down payment on a house.
Then there's the fastest-growing segment in the rental market - the empty-nesters. They are returning to the city and renting apartments to rid themselves of the hassles of caring for a house.
Based on a survey released by the Downtown Partnership, 85 percent of the city's potential rental pool is made up of single, young professionals or young married couples with no children; 8 percent are empty-nesters; and 7 percent are families.
This demographic breakdown mirrors the homebuying trend that has been driving Baltimore's resurgence during the past five years.
Renting and homebuying may be two different markets, but if renters eventually become homebuyers, then it is reasonable to hypothesize that more apartments in Baltimore will eventually translate into more home sales in the city, says Joseph T. Landers, executive vice president of the Greater Baltimore Board of Realtors. He points out that the relationship between renters and homebuyers is not lost on lenders and public policy makers who are looking for ways to keep stoking interest in Baltimore's housing market.
Tracy Gosson of Live Baltimore Marketing Center, an organization whose mission is to promote city living, said establishing a high-end rental market is just part of what is needed to keep the city exciting. As long as Baltimore continues to improve, from offering a wider selection of rentals, to more grocery stores and other amenities, the city will gain drawing power, she said.
"The thing with Baltimore is because the [for-sale] housing is so affordable, what you pay in rent or less, you can pay in a mortgage and own a house," she said. "We're not like Boston or New York where the prices for houses are so oppressive."
For the past two months, Toni Paz, 30, a fund-raiser for the Baltimore Symphony Orchestra, has perused the homebuying market. She's focusing on the Mount Vernon area, the neighborhood where she settled as a renter when she moved to Baltimore from Cincinnati.
"Initially, when I first moved here, I was probably not making enough [to buy]," she said. "Then when I did start making a decent salary, I wasn't sure if I was going to stay in Baltimore."
Now she knows.
She likes Baltimore, and her landlords, whom she calls "my Baltimore parents," offered to sell her the house next door to her carriage house. Suddenly, the idea of fixing her own plumbing doesn't sound like a bad idea.
While statistics are not available to support the metamorphosis from renter to homebuyer, Bill Cassidy, manager of the Fells Point Long & Foster office, has seen about a third of the renters who found apartments through his office become homebuyers.
He says he would advise renting in an area before buying there. "I might prefer someone who rents and learns the neighborhood to [someone who] jumps right in to [buying] something and then comes back six months later and says they made a mistake," Cassidy said.
According to experts, most people don't stand at a crossroads trying to decide whether to rent or buy. Renters and buyers exist in segmented markets, they say, but there's nothing like a strong rental market to prime the residential sales of the future.
"Certainly the downtown rental market is a nice incubator for future homeowners," said Robert M. Aydukovic, director for downtown housing for the Downtown Partnership.