BRRRR strategy with townhomes?

4 Replies

Has anybody applied the BRRRR strategy with a townhome or condo? There are way more in my price range and in running the numbers I can get way closer to the 1% rule with a townhome or condo in the Seattle area than I can with a SFR, with that said I know the HOA can change their dues and rules at will which can totally make or break an investment. But I'm guessing things like capx would be much lower due to the fact that the HOA covers the big expenses? I would love to hear from somebody who has experience with something like this!

(with rehab I mainly mean update. Floors, appliances, cabinets ect..)

Tyler.

Your returns out of state are going to be better than investing locally.

The HOA will cover big ticket items - yes - that is if they ever do take care of them.

You have no control over what the HOA does or doenst do. Which is why it makes things so complicated.

You could pay $500/mo for HOA and they may not replace the roof or repaint the property.

Also - sometimes when the HOA does do big ticket items, they increase the HOA fee to cover the costs of that expense.

I think its better to stay away from townhomes. 

99% of townhomes in Seattle do not have an HOA. @Antoine Martel you're right about condos though. I'd stay clear away from condos and HOAs. Townhomes are great as rentals in Seattle because who doesn't love a cut and dry rental? Majority are space efficient and don't have much of a yard to maintain which is a plus for tenants. 

@Tyler Smith You might want to think about condos outside of Seattle, or even outside of King CO. And quite frankly, HOAs and their fees are so poorly understood it's no wonder most people avoid them. Simply, the HOA amount doesnt matter. All that matters is what the HOA fee pays for. With single family detached homes you have utilities. Very often, HOA fees pay for water/sewer, garbage, gas, lawn maintenance, snow removal, etc. Within the HOA fee is also an amount that goes to the condos reserve requirement. There's no force savings account with a single family detached, that's up to the owner. Having a forced savings account is hardly a bad thing.

And let's also look at some of the rarely foreseen expenses with a detached home - lawn care.  Most people dont realize how time consuming lawn care can be.  This is time one could spend elsewhere doing something much more valuable.  And hiring a landscaper to maintain can be very costly.  

So yeah, condos have HOAs and monthly fees. You are the one who will have to decide if the fee is worthwhile. A refusal to buy a condo simply because of an HOA is poor decision making.

And last but definitely not least, it's worth mentioning that median sales prices for condos in Seattle area have increased just as much as single family detached since 2015.  So here's an investment that has a much lower cost of entry, providing just as much appreciation, and is less maintenance.  

I think looking at BRRRR for condos and townhouses can be a very smart avenue. But yes, it will require a little more homework

I've never bought where there's HOA because they may have a rental cap (how many places can be rented out vs owner occupied) or could potentially put one in in the future if they don't have one now, but I haven't looked into it much. One other risk of course is how well the board (volunteers usually right?) manages the funds and how their rules are written, since if they don't have a reserve for a big ticket item they could just ask for additional money from everyone and you may not have been planning for that, thinking your fees were going to cover anything big. That same thing could be a reason townhomes might not be a good idea either though, right? The siding is going bad...do you all cough up the money at the same time to replace the siding? The roof? I feel like I'd want to create a written agreement with the neighbors at least to be on the same page. Like I said though, I haven't invested in this area so defer to those that have, I'm just recalling what I've heard second hand.