Single family? Townhome?

Question

Hey everyone.

I have no experience in buying rental properties but I have done a ton of reading and I have a written plan to get started in the next 5-7 months. One topic I find a lot of negative comments about are townhomes. My main interest in real estate is single family home rentals. I don't know if this high interest is due to the simple concept of SFH, the ongoing cash flow, the high demand of SFH in my area, etc. But townhomes are all around me (I am in one myself) in very nice areas for fairly cheap. From what I read about them it sounds like I should stay away due to mediocre appreciation rates and HOA fees. Does anyone have any experience with buying and renting townhomes that has had a good experience?? Thanks in advance.

Hattie Dizmond · Answer

There are a lot of great townhouse units in Dallas.  I wouldn't personally invest in them for fix & flips, because there are only a couple of areas where they actually sell well, and those are very high end units.  On the other hand...they rent awesome here.  So, I would definitely buy, if the deal was right, and I knew I could hold the property long-term.  In other words, I wouldn't generally look at townhouses, if I were targeting a hybrid strategy where I was going to sell in just a few years.

Davidson is a fantastic area.  With Lowes, Rubbermaid & Ingersol, plus the college, there is huge demand without even talking about the Charlotte refugees.  The school district is amazing and quality of life makes it a highly desirable rental market.  If I were still in Charlotte, that would definitely be an area I would consider townhomes as long-term buy & holds.

Bryan N. · Answer

@Mark Albano

I have one and like it.  The HOA is the wildcard and in my case they are very stable and affordable.  Also, TH aren't an appreciation play so much.  If you buy one, be happy with the fact that it may never appreciate and ensure you have good cash flow.   All I personally care about is cash flow anyway.  Appreciation is just a bonus if it happens, but I don't plan on selling either way, so I don't care if it goes up or down in value.

Mike H. · Answer

I've got two townhomes. But I did it because they were in my town (which is very difficult to find rental properties where the numbers work) and because there was no HOA.

I don't like the idea of someone being able to tell me that I can't rent the place out. That would represent a huge risk.

So far I've had real good luck with both units. As I said, its very hard to find deals in this town that make sense as rentals so there are very few rentals in this town. And people love the schools.

I've had the same renter in the first one since I bought it over 3 years ago and they are great payers. This new one is the same way. They pay online like clockwork. I don't have to remind them.

Cash flow is good but not great. But still. Its super easy management and if I do have turnover, its 5 mins from my house which is rare when compared to all my other rentals.

Jack Knochel · Answer

Hey Mark, I own a live/work townhome that I rent out here in the Charlotte area.  I also have 8 townhomes locked up that I am wholesaling in the area.  I personally don't think I would invest in one again, unless the rents were through the roof.

Mark Albano · Answer

@Tom Yung

@Rhett Tullis

Thank you all for you informative responses. Sounds to me that TH can be a good investment, but I should just be very careful about doing it.

And yes @Hattie Dizmond

you are right about the area. I love the Davidson area! So you know what I mean when I say they are all around me? They are everywhere and in high demand. I would just be concerned with how long I would sit on it if I were to sell it and also how much it appreciates. Any thoughts anyone?

Tom Yung · Answer

@Mark Albano

I myself, had bought TH before for rental . In most cases they are very similar to SFH in terms of investment; Except HOA fees.

BUT watch out for TH that has rental or age caps, that means they only allow certain % of units for rental, the rest has to be owner occupied. Or some of them has a age 55 restriction. This makes it very difficult to lease.

I also do not like to buy TH older than 15 years old, as HOA fees are generally much higher than the newer ones because of the age.

Rhett Tullis · Answer

i do not own any but manage many.  biggest issues are

-raising hoa fees

-poorly run hoa

-too many rental units in complex making it harder to sell with conventional financing.

Single family? Townhome?

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