looking to buy first rental property and came across what I think is a pretty good deal on a townhome. seller asking for 75000 and willing to go as low as 62000. Has anyone ever invested in townhomes as rental props? If so what has your experience been or is not much different from a single family house. All feedback appreciated.
Generally townhomes can make good rentals - less landscaping problems. As far as numbers and such - treat it as a SFR. and they have a tendency to go a bit cheaper than a SFR with associated larger land values. They are especially good for Section 8 - because they get the same rate as a SFR but tend to be cheaper to purchase. Of course these are broad generalizations and may be different in your market.
To determine if you have a good deal - you need to look at what the rent might be for the townhouse, repairs and holding costs, ARV, etc. Just because the seller is willing to go down in price doesn’tmean it is a good deal. if the property has an ARV of $90k but needs $25k in rehab plus holding costs - him dropping the price from $75k to $62k isn’t as great a deal as it might first appear.
What are the market rents in the area for comparable properties?
You have to pay close attention to the HOA. You will be held responsible if the tenant violates the HOA rules.
Be careful with that Section 8 idea. If you chose the wrong tenant, your neighbors will be ticked off at you, and one bad tenant can destroy the value of an entire block. As they are ruining the value of the neighorhood, they are destroying the value of your place, too.
I’m a relative small investor with three properties under my belt, two of which are long term rental townhouses., the third is my current flip. I like townhouses for the following reasons:
- usually cheaper to buy than SFH but rent at about the same and sometimes above the rate for a similar PRICED SFH.
- most townhouses are pretty simple, built efficiently, (fewer windows and less roof to replace), compact plumbing, reasonably small kitchen and baths that are reasonably easy to replace.
- Non-end unit townhouses have less exterior to maintain than SFH
- townhouses are generally the entry level housing. This means they tend to sell even in down markets if you ever need to sell and rent to a better quality tenant than apartment.
- Since the building is usually a higher percentage of the assesment, you get a better depreciation figure for tax writeoff than SFH
I’m looking to invest the $$ generated by my flip in more long term townhouse rentals.
Forgot to add:
No matter what the property, it still has to cashflow. You MUST buy at a discount in my market or you will simply go broke.
thanks to everyone who had input. The townhouse is down the street from a major university and I will most likely not have a problem renting it out. The current owner has already done some major remodeling the house is very clean and has a two car garage as well. My initial reaction is that this would be a great beginner rental. I am going to the bank today to see about mortgage options and begin my real estate quest. Any other input would be greatly appreciated.
What are the market rents? I asked this before and you didn’t say. This is the single most crucial peice of info you should look at.
I haven’t been able to check rents in the area yet. I will be attempting to do that this weekend then I’ll let you know. Thanks for your help.
useually when you have a townhouse or condo there is a HOA. I would make sure I knew what the HOA (home owners association) fees are and what they include.
Also what is the responsibility of the HOA.
Im my area some townhome communities, the HOA is responsible for the roof and insurance, other communities this isn’t included.