What is the market sentiment investing in a townhome or duplex?

[Kelly Stanton]

What is the sentiment around investing in duplexes or townhomes in this market? We've found a number of new developments that have reasonably good prices, but are not feeling all that confident that it will be a good long term investment that will appreciate vs a single family home. Any thoughts?

[Nicholas L.]

@Kelly Stanton

can you be more specific?

do you own or rent your primary?

would this be your first investment property?

price point(s)? HOA or no HOA? deferred maintenance?

[Jacob St. Martin]

I agree with Nicholas, it is hard to say anything concrete without knowing more details. However, I do have a couple general thoughts. First, townhomes tend to come with HOAs that can eat through your cashflow and can sometimes have really restrictive rules for real estate investors. For instance, many of the HOAs in my area do not allow renting to college students (I am in a college town) and do not allow STRs. Additionally, a duplex will likely benefit from a lot more appreciation than a townhome but again I can't say that definitively because we don't have details. 

[Eliott Elias]

Depends on the area, you want to make sure the rental demand is strong. Most duplexes in Austin don't even make sense, you barely eliminate your living expenses with one side. I would buy in Austin MSA and try to STR one side

[Jordan Moorhead]

@Kelly Stanton they're very different. I would rather invest in a duplex that I can fix up than a townhome

[Ricardo Hidalgo]

Quote from @Kelly Stanton:

What is the sentiment around investing in duplexes or townhomes in this market? We've found a number of new developments that have reasonably good prices, but are not feeling all that confident that it will be a good long term investment that will appreciate vs a single family home. Any thoughts?

 I love townhomes but I would never make a decision based on property. You have to reflect on the numbers and appreciation with cash flow. Typically duplex offer more leverage if numbers are similar. 

[Kelly Stanton]

Nicholas,

We currently own a primary residence and this would not be our first investment property. One unit we are looking at is a new townhome in East Austin around $275k-$350k with a $75 HOA.

3BR, 2.5BA - As far as I know the HOA does not prohibit any STRs, but that is something that is definitely worth looking into.

[Kelly Stanton]

Quote from @Eliott Elias:

Depends on the area, you want to make sure the rental demand is strong. Most duplexes in Austin don't even make sense, you barely eliminate your living expenses with one side. I would buy in Austin MSA and try to STR one side

 How do you feel about new developments out east by the airport? I've been hearing a lot a new "plans" for Tesla, Boring and potentially SpaceX that could increase rental demand in the area. Could take a while though. 

[Eliott Elias]

Quote from @Kelly Stanton:

Quote from @Eliott Elias:

Depends on the area, you want to make sure the rental demand is strong. Most duplexes in Austin don't even make sense, you barely eliminate your living expenses with one side. I would buy in Austin MSA and try to STR one side

 How do you feel about new developments out east by the airport? I've been hearing a lot a new "plans" for Tesla, Boring and potentially SpaceX that could increase rental demand in the area. Could take a while though. 

 You want something that is going to cash flow today, not speculation 

[Nate Sanow]

Man it might be the opposite. In my market small MFR get gobbled up in 3 seconds. If you think rents are strong and can grow there's the value. Most buyers of multi see the value differently than just typical appreciation… it's based on rent growth.

[Kelly Stanton]

Quote from @Eliott Elias:

Quote from @Kelly Stanton:

Quote from @Eliott Elias:

Depends on the area, you want to make sure the rental demand is strong. Most duplexes in Austin don't even make sense, you barely eliminate your living expenses with one side. I would buy in Austin MSA and try to STR one side

 How do you feel about new developments out east by the airport? I've been hearing a lot a new "plans" for Tesla, Boring and potentially SpaceX that could increase rental demand in the area. Could take a while though. 

 You want something that is going to cash flow today, not speculation 

 That's fair. My thoughts are if we could cash flow even a couple hundred dollars in that area, there is exponential potential for rental demand that could drive prices up. My understanding is that the Tesla plant is currently only operating at 1/3 of operating capacity, so many more prospective renters moving to that area soon. 

[Eliott Elias]

Quote from @Kelly Stanton:

Quote from @Eliott Elias:

Quote from @Kelly Stanton:

Quote from @Eliott Elias:

Depends on the area, you want to make sure the rental demand is strong. Most duplexes in Austin don't even make sense, you barely eliminate your living expenses with one side. I would buy in Austin MSA and try to STR one side

 How do you feel about new developments out east by the airport? I've been hearing a lot a new "plans" for Tesla, Boring and potentially SpaceX that could increase rental demand in the area. Could take a while though. 

 You want something that is going to cash flow today, not speculation 

 That's fair. My thoughts are if we could cash flow even a couple hundred dollars in that area, there is exponential potential for rental demand that could drive prices up. My understanding is that the Tesla plant is currently only operating at 1/3 of operating capacity, so many more prospective renters moving to that area soon. 

 There are arguments to be made, if demand never comes are you happy with the investment you made? 

[Kelly Stanton]

Quote from @Nate Sanow:

Man it might be the opposite. In my market small MFR get gobbled up in 3 seconds. If you think rents are strong and can grow there's the value. Most buyers of multi see the value differently than just typical appreciation… it's based on rent growth.

 Nate, how are you feeling about rental markets in Tulsa right now? 

[Aaron Gordy]

@Kelly Stanton Getting a license to run an STR might be tough in Austin. Some folks do it below the radar but executing a business plan based upon the potential to get a license is highly risky. The money potential is there, though and that is why many folks do it anyways. Run your numbers as a str, mtr and ltr just in case. Duplexes will likely cash flow better than townhomes. There are tricks to the trade that can boost ltr income as well. Is there sufficient and increasing rental demand in East Austin? Most definitely!