Cost is one of the greatest obstacles to residential real estate investment. You need money to make it, and houses are costly.
This is why many investors gravitate to condos and townhomes. This begs the question:
Are townhomes an investment worth it?
Location is crucial when buying a condo or townhouse as an investment. There are many factors you should consider:
- Localization
- Cost
- HOA (and any associated fees)
- Scope of work
- Market
Condos and townhomes generally cost less upfront and are easier to renovate. You can also rent them out as rental properties due to the convenience of having on-site amenities. Here are some factors to consider when making a decision.
Localization
The most important thing to consider when purchasing a townhome is its location. It would help if you made every effort to live in an area with desirable schools and other factors that enhance livability, regardless of whether you’re a single person, a couple, or a family. It would help close to grocery stores, shopping malls, gyms, nightlife, safe streets, and other amenities. This will not only improve your quality of life, but it will also help future tenants if you rent it.
Cost
You will likely find townhomes at thousands less than detached houses and condos at even lower prices if you search within one market. This lowers the barrier to entry into a market.
HOA fees are important to be aware of. HOAs manage condos and townhomes. It’s easy for your budget to be ruined if you don’t pay your HOA fees.
HOA (and any associated fees)
Think about the HOA and decide if it is worth your time. Are you able to work with your HOA to resolve any issues you may have?
Are they happy to have landlords, or do they prefer the owners to live on their property? Are there any rules against flipping that could affect your schedule? You can do a thorough assessment of all HOA bylaws, covenants, and rules to ensure you don’t get stung later.
Condos and townhomes are excellent investments for many investors. It is a matter of doing the research beforehand to ensure that it is as good as expected.
Also, it costs money to maintain all these amenities. Therefore, HOA fees for condos and townhomes can be very high. Your monthly bill could be as high as a few hundred dollars.
Many HOAs charge special fees and quarterly fees. These fees are used to fund large projects such as pool resurfacing, parking lot improvements, or security upgrades. These fees can wipe out any savings you might see by choosing a condo or townhouse over a detached house. So pay attention to the math.
Scope of work
The good news? Most of the exterior work is handled by the HOA. This means that you can concentrate your renovation budget on the interior and, if necessary, the small backyard.
Although there are exceptions to every rule, detached homes require less work than those with attached homes. This allows you to turn the property around and make a profit quickly.
Market
Consider the unique circumstances surrounding condos and townhomes if you are looking to sell your property. There are many areas with cooler condos and townhome markets because fewer buyers are interested in buying a home with shared walls or a small backyard.
These amenities are often found in condos and townhomes, making them more desirable to rent than they are in a rental.
It all depends on your circumstances
Real estate investing is not a simple business. It is often a “your mileage may differ” situation.
Markets and investors are both different. It would be best if you weighed all aspects of your situation before making any decisions.