Townhomes for sale are one of the best real estate investing opportunities. They are a special type of rental property that is easy to rent out and needs little maintenance – a perfect passive income source. If you have decided to start investing in townhomes, this is a guide on how to find townhomes for sale and how to choose the best real estate deal.
What Are Townhouses?
First, let us make it clear what townhouses are so there is no confusion when you are hunting for a property.
Townhouses are also called row houses because they are built in rows, sharing a wall with the next house. The end properties in such a development – or corner lots – share only one wall with their neighbor. So townhomes are separate houses with adjacent neighbors on one or two sides.
Row houses combine the best of a single family home and a condo. Like with single family houses, you own the whole building and have your private yard and entrance. Like condos, townhouses are maintained by an HOA and offer shared amenities for more communal living.
Related: Townhouse vs. Single Family Home Investment: Which Is Better?
Here is a breakdown of a few characteristics of townhomes:
- Townhouses usually have a private yard at the back and share a common outdoor area with neighbors at the front.
- They are two or three stories high, complete with a cellar and an attic.
- There is either a garage on the lot or a parking space nearby.
- They are usually close to downtown. There is typically public transport available.
- Townhomes sometimes have amenities like a children’s playground, sports facilities, a pool, or a shared garden.
Why Buying a Townhouse Is a Good Investment
A good investment property is one that brings a good cap rate and has a high occupancy rate and you can get just that with a townhome investment. Besides that, buying a townhouse is a good investment because:
- Townhomes for sale are cheaper than single family houses because they have less land to them. So you can make a smaller investment upfront.
- Maintenance and landscaping are usually included in the HOA fees. So you as a landlord have no rental property management duties concerning this.
- Townhomes for rent attract young couples and empty-nesters. These are long-term rental leases and a stable rental income for you.
Related: 8 Things Millennials Look for When Renting
All this makes townhomes for sale an excellent source of passive income, even for a remote landlord.
Note: If you are planning to rent out on Airbnb, you should know that some complexes do not allow it. They only allow townhomes for rent long-term and usually have a cap on the number of units in the complex that can be rented out. So check with each one where you are considering townhomes for sale before you make a move.
Financing a Townhouse Purchase
Keep in mind that many mortgage lenders have stricter rules for loans on townhouses for sale. It is because townhomes do not appreciate as well as single family homes with more land. They would often refuse to finance a property in a townhouse complex with too many rented units. Go for townhouse complexes with more owner-occupied units for a greater chance to get funding.
How to Find Townhomes for Sale
Beginning your investment property search, you may be wondering, “How do I find townhomes for sale near me?” The traditional property search would not give you all the information you need to make a good investment decision.
Luckily, there are real estate investment tools that make finding townhomes for sale really easy. One such real estate investment software is Mashvisor’s Property Finder. It lets you search by criteria like property type, bedroom count, preferred rental strategy, budget, location, etc. and then provides a list of high return investment properties for sale. You can search in multiple cities at once (an unlimited number of cities if you sign up for an Expert Plan) to save time and not miss lucrative opportunities.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!
You can also use Mashvisor’s Heatmap tool that lets you explore an area of your choice and see how the housing market there is doing. You can filter the Heatmap based on your investment criteria. Explore any neighborhood to see median property prices, Airbnb occupancy rate, estimated rental income, the optimal rental strategy for the area, and so on. Compare neighborhoods in the city to find the best area to invest in real estate.
Analyzing Townhomes for Sale
If you want to be a successful real estate investor, it is a must to do investment property analysis before buying or selling. Exploring the available properties and the general neighborhood is good, but you can get even more data. Dive deeper with Mashvisor’s investment property analysis tools. Each property’s investment potential is analyzed against the housing market and your financial goals.
There is an investment property calculator available for you to play out different scenarios about the property for sale. Input your financing method (cash or mortgage) with parameters (interest rate, down payment) and the calculator shows you the return on investment you can expect based on market data and real estate comps:
- Cash on cash return
- Cap rate
- Cash flow
You will also get an estimate of the rental income as well as the occupancy rate. All of this info will be available for both the traditional and the Airbnb rental strategy. That way, you can immediately see which is the optimal rental strategy based on the numbers.
To make the calculation even more precise, you can edit the monthly expenses or factor in an upgrade you plan to make to charge a higher rent price. You also get a list of similar rental properties in the area (rental comps) to compare how realistic your expectations of a rental income are.
Related: How to Estimate Rental Property Expenses Before Buying
In Conclusion
Townhomes for sale are an excellent choice for the real estate investor looking for long-term tenants and a secure passive income. Knowing what to expect and going about your property search in the right way (and with the right tools!) helps. Doing real estate market analysis and investment property analysis before buying increases your chances to score a profitable real estate deal.