Since this market has been really hot right now, I am looking to buy my first townhome for rental investment. Is it a good idea to do so? I understand price has gone up so much. I am thinking outskirts of Charlotte area with new townhome development in (Matthews, Gastonia, Concord etc)
Insurance Agent · Concord, NC · Member since 2016 · 46 posts · 41 votes
4y
I was literally on my way about 2 months ago to make an offer on a townhome when my agent called to inform me that the local HOA was no longer allowing renters in that community. Best advice is to talk to any HOA of the community you're looking at and ask them about this. I would have been left with a property I couldn't rent as my first investment which would have been bad.
Charlotte is very hot right now so outskirts are a better idea IMHO if you're looking at the MLS. I just put a duplex under contract in Hickory so keep going; there are still good properties out there.
Insurance Agent · Concord, NC · Member since 2016 · 46 posts · 41 votes
4y
I was literally on my way about 2 months ago to make an offer on a townhome when my agent called to inform me that the local HOA was no longer allowing renters in that community. Best advice is to talk to any HOA of the community you're looking at and ask them about this. I would have been left with a property I couldn't rent as my first investment which would have been bad.
Charlotte is very hot right now so outskirts are a better idea IMHO if you're looking at the MLS. I just put a duplex under contract in Hickory so keep going; there are still good properties out there.
Rental Property Investor · Charlotte, NC · Member since 2019 · 42 posts · 25 votes
4y
@Ankit Desai
Ankit, townhomes are highly desirable rentals! The issue with them is they typically have HOA fees that can kill the investment. If you can find a townhome that will cash flow and doesn't have HOAs you could do really well!
HOAs typically do not like renters and may even have a clause preventing the home from being rented out. HOAs can also increase fees typically, so a home that would have been a great investment may turn bad without you doing anything wrong.
Real Estate Agent · Charlotte, NC · Member since 2019 · 5 posts · 8 votes
4y
I agree with @Pieter T Van Zyl and @Jordan Thompson.While townhomes are very desirable rental opportunities, you have to make sure to do your due diligence on the HOA if that's what you are looking to invest in. All HOAs have some sort of Covenants, Conditions, and Restrictions (CC&Rs) document that lay out the rules and regulations for living in the HOA. This document will more than likely tell you if there is a rental restriction in the HOA, or if you can even rent out a townhome at all. If you or your realtor cannot find the document, then it would be best just to reach out to the HOA directly like Jordan said.
Investor · Cary, NC · Member since 2012 · 214 posts · 194 votes
4y
I see a lot of negative comments about townhomes in HOA, but one should also consider the positives. HOA fees typically cover all common area maintenance and landscaping and often the roof and siding (exterior) of the units also. So, you are effectively paying maintenance costs for these as you go but without the HOA 'reserve funds' it's true you may not pay anything for years and then 'bam' one day in the future your roof needs replaced and you have to fork over big $s in one lump sum. Another pro = within an HOA community there may be amenities that will be attractive to your renters (pools, small park, tennis court, etc.) and this can raise your rental rates above what they'd be without them. Another pro = the HOA rules/restrictions tend to ensure that the community is kept more tidy and desirable - this can also benefit you and result in higher rents = think: no tall weeds and trash strewn about or a junky RV or maybe an old car up on blocks parked in your neighbor's driveway.
Real Estate Broker · Greater Charlotte NC and Charleston, SC areas · Member since 2017 · 109 posts · 60 votes
4y
Hey, Ankit;
All comments here are pretty much on point. Townhomes CAN be a great investment- I have one that is in Uptown Charlotte, right across from the Panthers / Charlotte Football Club's Bank of America stadium, and it is a consistently excellent rental, with major appreciation- but that was a very unique investment.
The HOA dues will be higher, but you get lawn maintenance, and generally (but not always) water and sewer covered, that you would not have covered in most single family homes, plus your homeowners insurance is less, since the exterior is "generally' maintained by the HOA. However, you and your Raltor need to be VERY careful with three things:
1.) Many townhomes and condos have 'rental restrictions or rental caps' in place- so that is priority # 1 to check those CCR's (Covenant and Restrictions) and community Bylaws and any recent addendums to the original ones- things can change as time goes on, and you must make sure that you have the MOST RECENT copies from the HOA.
2.) You and your Realtor need to check the balance sheet for the community to make sur that there is enough working capital to cover any 'proposed or special assessments' that may be looming (replacing roofs or painting buildings, resurfacing driveways and parking areas)- if the HOA isn't in good shape with enough reserves, all owners will get a hefty, nasty surprise to 'band together' to pay for major repairs- and it's usually at the most inconvenient time. If you don't pay them (or your HOA dues) when due, the HOA can foreclose on the home.
3.) Check to see if the property is held as a "condo" or a "townhome" (where each owner owns the land underneath his or her building, and share only in the common areas)- the term 'townhome' does not designate the "look" of the unit (like a two story versus a flat, garden style / one level place)-that is a commonly misunderstood misnomer. The reason that it is important is for two reasons- A: Condo interest rates are typically slightly higher than townhomes, and B: many condos cannot get first time buyer financing (FHA).
So- along with other's viewpoints- make sure to triple check the above! You don't want to get into a contract with any of the issues above, find out that you cannot rent out your unit after all, and lose your due diligence money to have to get out of it because you missed something vitally important. And this is a really hot, competitive, seller's market right now, so you don't want to waste any time on the wrong property.
Best of luck to you! Kristen Haynes, BIC, GC, CMRS
Specialist · Charlotte, NC · Member since 2021 · 185 posts · 106 votes
4y
@Ankit Desai
Gastonia is a great area to invest. Mathew’s is a great area although a little more expensive than Gastonia and not really on the outskirts to much. Also why it’s more expensive being close to Charlotte. I’m a realtor and investor in the Charlotte metro area. Please reach out as I’d love to help. I have a wealth of resources and know about all about the great investment areas in Charlotte.
Real Estate Consultant · Houston, TX · Member since 2020 · 206 posts · 944 votes
4y
Hello @Ankit Desai we have many properties available for you. Our buyers pay 12% interest and 3.75 points to you as an investor. We are a tight-knit group and we work together to make money on our deals. You are welcome to join us.
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