I am looking at a potential deal. It is 3 bed/2.5 bath/2 car garage townhouse (1 unit of a duplex) in a gated community. Price is about 25% discounted. Conservative rental numbers show that the cash flow will be positive $300 per month to $350 per month after paying mortgage, taxes, insurance. The location is in good school district, convenient for commute and in a sought-after gated community.
I have dealt with single family home only, not in townhouses. My questions are:
Is it an okay deal? (I know it’s not as good as my single family one which nets $500 p.m.)
How easy/difficult it is to rent a townhouse? esp. in a gated community?
Do townhouses have to pay monthly HOA dues that are typical for condominiums for maintenance of common area (yard etc), roof repaid etc.
Are townhouses more difficult to sell than single family homes? Are they as bad as condos?
My biggest concern is that although a newer construction (2006) it is hardiplank construction, not brick.
Should I go for this deal or move on to next one?
Any help is appreciated.
Thanks.
The HOA is going to be key. I am assuming there is one given the ‘gated community’ comment. Check the HOA rules and regs. They can have restrictions on renting a place or maintenance. Otherwise I would not say a townhouse is all that difference.
You have to account for all costs in your calculation since HOA dues can be huge. Our one townhouse nets (including the HOA) as much as most of our houses. Although the rental market is strong here, our townhouse generally has a list of people wanting to rent it, so it is very easy to rent. The location is certainly important to potential renters and buyers. Townhouses generally do not appreciate as well as houses. For that reason, the townhouse has to be a great deal for us to consider. One last thing to consider is that special assessments (lump sum or temporary increases in the HOA dues) can be assessed at any time, which can take a bite out of your cash flow.
Is the cash flow based off just subtracting debt service and taxes from rent? So say $800 rent - $500 PITI = $300 cash flow? I doubt this is the case, just want to make sure. You may want to go ahead and post more of the numbers so that more experienced forum members can help you. I also see that several of your questions can be better answered by contacting the HOA for this potential deal. No demon HOA is the same!
I own a townhouse with similar stats as yours (gated community, close to schools, mall, and freeways, great neighborhood) and it has be VERY easy to rent and maintain. I’ve owned it for 4 years and had three empty days, three sets of renters. The empty days consisted of cleaning the townhouse for the new tenants. Like another poster said, when I get a notification that my tenant will not be renewing, it has a nice list of interested potential tenants to chose from.
I do think that townhouses are in between. If you can’t afford a house yet, townhouses is the next best thing when you have a family. A condo, for me, is great if you live in the CBD area or if there are less number of occupants. Try to talk to the people in the neighborhood about the actual HOA charges and better yet talk directly to the HOA admin so you’ll know about restrictions and certain rules.
When I was in college I rented a house from a landlord that had bought a 4br place a decade earlier when he was in college. There was a HOA in place. After he bought the HOA changed the rules so that a maximum of three people could live there unless they owned the place. The landlord rented to me and two roomates at $865/month a place that had a payment of over $700/month and $125/month HOIA dues. It should have brought in $1100/month if it had been able to be used as a 4br place.