Are you a new real estate investor wondering “Is buying a townhouse a good investment?” Well, the answer may not be as straight forward as you think!
As you begin to make your way into the real estate investing industry, you need to learn to do proper research. This includes researching the type of investment property in mind, as well as asking yourself “Is 2019 a good time to buy a house?” Because if the answer to the second question is no, then there’s no need to even look into townhome investments right now, is there? And there are several factors and pros and cons that you must learn and read about when investing in a townhouse. So, read below to find out Mashvisor‘s answer to “Are townhomes a good investment in 2019?”
What Is a Townhouse?
Before answering “Is buying a townhouse a good investment?”, you have to understand what a townhouse really is. Basically, townhouses, or row houses, are properties that are attached to other properties. In a townhouse complex, each property has its own backyard space, as well as having the shared common space between all the properties. A townhome can be a corner lot or a regular lot. With a corner lot, the townhome is only attached to one unit on one side rather than two units on both sides of the property.
All owners of townhomes must pay maintenance and amenity fees on a regular basis. They also must abide by the same compound rules as their neighbors. These rules differ from one compound to another.
2019 Real Estate Market Forecast
Let’s answer the first question in our research: Is 2019 a good time to buy a house? This is a major question that can be answered easily by looking at the real estate market forecast for this year. Of course, one of the main topics that has been widely discussed by experts in the field for 2019 is the expected rise in mortgage rates. Mortgage rates are expected to reach 5.8% in 2019. While the rate has increased, experts do not advise against buying an investment property as the mortgage rate is historically low.
Also, the expected rise in mortgage rates is predicted to deter some home buyers which could mean less competition for you in the market. This will likely cause a halt in the rise of property prices. In 2019, properties for sale are expected to remain at the same price or even fall in price due to the expected decrease in buyers.
Finally, another important point that a real estate investor must study is the rental population in the market. According to several experts, older and younger generations alike are steering clear of buying property and choosing to rent for long periods of time. This is great news for you because it means you will potentially have a larger pool of tenants to rent your property. So, is buying a townhouse a good investment in 2019? Well, it seems the answer is yes.
Is Buying a Townhouse a Good Investment? – The Pros
- Cost: Investing in townhouses to use as rental property is definitely a great idea when you look at the costs. The prices of row houses in most areas around the United States are substantially lower than that of a single family home. If you have a limited budget, then investing in townhomes is a good option.
- Rental Property Management: The complex property manager takes care of every unit in a townhouse complex. This is perfect for you as a real estate investor because you never have to worry about rental property management at all.
- Maintenance: Since you pay monthly maintenance fees, the association responsible for the complex will take care of any maintenance needed on the rental property. You will still be responsible for some maintenance, however, but the association will take care of a great deal.
- Great Location: Is buying a townhouse a good investment when looking at location? The simple answer is yes! Townhouse complexes are often located in great areas near amenities, transportation, and schools. This is a huge plus when you are marketing the property as a rental.
- Townhouses Are Often Modernized: While you may have to cut some corners in terms of age of the home when buying a single family property to find an affordable option, the same is not true for a townhouse. You can often find townhomes with very modern designs and features that are attractive to potential tenants for a great price.
- Rental Income: Townhouses have the potential to bring in great rental income. They are popular among families who want affordable housing that comes with space around the home for their kids. You can make a good return on investment with the steady rental income from a townhouse investment.
Related: What Is a Good Return on Real Estate Investment?
Is Buying a Townhouse a Good Investment? – The Cons
- Maintenance Fees: While having someone else take care of maintenance is a huge plus, paying maintenance fees is definitely not a pleasant experience. Fees are sometimes steep and often increase, sometimes dramatically, without much notice.
- Real Estate Investment Loans: When it comes to financing a townhouse investment, it may be more difficult than you think. Banks are a lot more hesitant to give investors real estate investment loans when investing in townhomes, even new ones.
- Appreciation Fail: Unfortunately, making money in real estate is not all about rental income. A huge part of the equation will be the investment property’s resale value. Keep that in mind when looking at townhomes as they are notorious for how difficult it is to raise their value. Unlike detached single family homes, townhouses may not appreciate in value very much or even at all. This could harm your return on investment potential when you sell the property.
- Limited Use: Since your townhome is part of a complex, you must abide by the rules. This means not being able to rent out your property in all the ways you want. You may be investing in townhomes to rent out on Airbnb. However, this might not be possible depending on the complex you buy in.
Related: What to Consider Before Investing in Townhomes for Rent
The Bottom Line
When it comes to making money in real estate, it is all about doing enough research. The advice above is only the beginning for you when buying an investment property. It is now your turn to find out more about investing in townhouses for rental. Start by searching for “townhomes for rent near me”, “how to find an investment property”, and “rental property calculator” online. These searches will help you in different ways when learning how to find investment property.
The first will give you an idea of the market and the demand for townhouse rentals in the area. The second will help you reach sites like Mashvisor that offer heatmaps and property listings. Finally, the last will probably send you to Mashvisor as well. Our rental property calculator is the final step in determining if any property makes for a good investment. This investment property analysis tool allows you to estimate potential profit margins. It will provide you with things like expense estimates, rental income, cash flow, and ROI.
Click here to start looking for and analyzing townhomes for sale with Mashvisor.
After you do an evaluation of your goals, as well as an evaluation of the properties in your area, you can finally answer the question “Is buying a townhouse a good investment?”
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