SFH vs 2-4 unit Multifamily vs Condo. vs Townhome given current market dynamics?

Question

I am looking in both the Seattle and Chicago areas for my next investment property. I'm trying to pick a single asset class that will bring the best long-term returns. I am buying in A-class areas that I will live in for a few years then convert the property to a rental and repeat. I plan to hold these properties as rentals forever, only selling after 30+ years.

Typically, I would focus on SFH/ 2-4 unit Multifamily, but these are both extremely competitive in desirable parts of Seattle in Chicago. Specifically for Seattle, there is a soft townhome market and a VERY soft condo market, with many condos selling for less than they did 5+ years ago. I belive that owning land is still the best long-term move, but there are many VERY good deals for condos that make them hard to turn away from. There is also a glut of new-build townhomes with heavy price cuts that builders are offering heavy incentives to get rid of.

Which are the best asset types to focus on? Is it worth potentially overpaying to get into a single family home/ multifamily despite them being very competitive? Or would it be smart to aim for a condo/ townhome for a good deal now, despite the lack of land ownership and long-term HoA drag? Interested to hear your thoughts.

Sean Smith · Answer

@Tyler D. I can only speak on markets I know intimately.

When it comes to Seattle, there's a lot of negotiability in the condo and townhouse markets. And there's a decent amount of negotiability in other asset classes as well. I just helped a Biggerpockets member buy a triplex in Ballard in the $900k's plus a seller-paid rate buy-down and repairs. Listed originally around $1.3M - clearly overpriced - but it should have sold for at least $1.1M.

Point is, there is negotiability everywhere right now.

For your purposes (long term hold) you'll want to focus on the asset classes that are resilient and lend themselves to growth potential. Condos and townhouses are often the worst appreciating property classes you can pick, but they're cheap.

Think of it this way... if the resale market is in total lockjam (like it is now) when you want to sell in a few decades, do you believe the condo, townhouse, single family, or small multifamily will be easier to sell for top dollar?

Go for the single family or small multifamily IMO. But only if it pays for itself once you move out - that's the baseline goal. And if you can get it to cashflow positive, that's icing on the PNW real estate cake.

Ashish Acharya · Answer

Tyler, I’d look at this as an investment decision first, but I’d also layer in the after-tax return because you're planning to live in the property first and convert it to a rental later.

For each asset type, I'd compare the purchase price, expected appreciation, rental income, HOA/operating costs, financing, maintenance, and then the depreciation you can expect once it becomes a rental.

I'd also keep very good records of your purchase price, improvements, and the property's value around the date you convert it to a rental. Those details can become important for depreciation and eventually the tax consequences when you sell.

A condo or townhome can look like the better deal upfront, but I'd want to compare the 30-year after-tax return, not just today's price versus today's rent.

Personally, I'd choose the property that gives you the best combination of livability now, rental economics later, and long-term after-tax return rather than choosing purely based on asset class.

Randy Schell · Answer

I'm a dirt guy too lol. I'd rather pay a little more for something I'm happy holding 30 years than get a deal on a condo and worry every time the HOA sends a letter.

Randy, Bunklow

Denise Supplee · Answer

Hey @Tyler D. Start with how the property will work as a rental once you move out. Can the rent cover expenses, management, and reserves? A long holding period doesn’t make overpaying harmless. Condos can work, but check rental restrictions, HOA finances, insurance, and upcoming repairs, a special assessment can quickly eat up that discount. Some townhomes also include land with little or no HOA. The right choice is the one where the numbers and ownership support your plan.

Richard F. · Answer

@Tyler D. Condos are a poor choice no matter the market...unless you are extremely well versed specifically in Condo/HOA financials including Annual Budget, Reserves Funding Plan, Reserve Studies and what they tell you, and, what to ask for and study in regards to prior year budgets and Board meeting minutes.

You must understand that most Boards do not need authorization for monthly fee increases or for special assessments. They are mandated by their own By-laws to maintain, protect, and preserve ALL of the common elements, however many Boards choose to defer maintenance far beyond a reasonable end of useful life because they do not want to increase the fee or have a special assessment. Elements of the project deteriorate regardless, there is no escaping an eventual expenditure. You need to be able to review the documents and actually understand if/when that "due date" will come. Never rely on any RE agent, or a resident or Board member of the project to determine this.

I am always happy to review any actual project docs or financial reports, having been a Managing Agent for multiple COA/HOA projects for over 10 years.

Kyle Jones · Answer

Tyler, it sounds like the worry is overpaying for the "right" asset type and then living with that choice for 30 years. When you're holding that long, the age and condition of the building matter as much as the type. On the Chicago side, a lot of 2 to 4 units in good neighborhoods are 80 to 120 years old, and they come with their own list:

- Masonry. Tuckpointing, lintels over the windows, parapets, and chimneys. Look for cracked or missing mortar and cracks above the windows.

- Back porches. A lot of wood porches have been rebuilt without permits or are near the end of their life. Check the condition and the permit history, because the city does enforce porch issues.

- Heat. Old boilers with radiators, or one furnace per unit. Ask the age of each one and whether the units are separately metered.

- Basements. Water, old clay or cast iron sewer lines, and flood protection like an overhead sewer or backwater valve matter in a lot of neighborhoods. A sewer scope is worth the money.

- Electrical. Old wiring and service in older buildings, and whether each unit has its own panel.

- Garden units. Confirm it's a legal unit before you count its rent.

The same thinking applies to a condo, just at the building level. The reserves and the age of the roof, masonry, and mechanicals decide your future special assessments.

None of that means skip the 2 to 4 unit. It just means price the next 10 years of big items into what you're willing to pay, then compare that number against the condo or townhome deal.

Kyle

Ryan Baker · Answer

Tyler, if the long-term plan is to live there and then rent it, a 2 to 4 unit is hard to beat: you can buy with a low-down-payment owner-occupied loan (FHA or conventional), and part of the projected rent from the other units can count toward qualifying. Condos can be tricky later because some lenders restrict investor financing on certain HOAs, and townhomes usually cash flow less as rentals. I'd run the numbers on the 2 to 4 unit both while you live there and after you move out. Happy to walk through the qualifying math on a quick call, my direct line and email are on my profile.

(Drafted with AI assistance.)

Divin Kanyama · Answer

@Tyler D. I wouldn’t pick based on appreciation or land alone. Since you’ll live there first and hold long term, I’d focus on something you’ll enjoy living in that can also work as a rental.

In Seattle, I probably wouldn’t overpay for an SFH just to say I own the land. A 2–4 unit gives you flexibility if the numbers work, and a fee-simple townhome could be a solid middle ground. Just compare those builder incentives with actual resale comps.

I wouldn’t rule out condos either, but the discount needs to justify the HOA and resale risk. Dig into the reserves, insurance, assessments, litigation, rental caps, and fee history—a cheap unit in a poorly run building can get expensive fast.

My order would probably be a well-priced 2–4 unit, a fee-simple townhome, then an SFH if the premium makes sense. I’d only choose a condo when the discount clearly offsets the added risk. Ultimately, I’d compare the actual deals using conservative rent, taxes, insurance, maintenance, vacancy, and HOA costs.

That’s just how I’d look at it—local rules, financing, and the specific property could change the answer, so it’s worth running the final numbers past local real-estate and tax professionals.

Jimmy Samaha · Answer

Since you plan to hold 30 years or more, I would weigh the HOA more than the purchase price. Condo HOA dues tend to climb over time and one special assessment can wipe out years of cash flow, so before buying I would read the reserve study, the budget, and the last couple of years of board minutes. Also check whether the building limits how many units can be rented, because that would kill the live in then rent plan.

A new build townhome with builder incentives can work if the HOA is small and covers very little, since then you are closer to owning the house itself. Whatever you look at, run rent minus HOA, taxes, insurance, and a reserve for vacancy and repairs before you fall for the discount. If the numbers are close, paying a bit more for a 2 to 4 unit you can live in is usually the better long hold, because the land and the extra rent do the heavy lifting.

SFH vs 2-4 unit Multifamily vs Condo. vs Townhome given current market dynamics?

SFH vs 2-4 unit Multifamily vs Condo. vs Townhome given current market dynamics?

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