The team at NewGen Property Management works with a lot of first time investors. We are able to lend valuable advice to help them get started on the right track with their real estate investment journey. One of the most frequently asked questions we get is, “What kind of property should I buy? Are condos and townhomes better or worst than single-family homes? Which is the better investment for me?” In this post, we offer two benefits and 2 risks associated with both.
Condos and Townhomes
Benefits
- Turnover costs are generally lower in condos and townhomes due to the fact that these dwellings tend to have smaller square footage than single-family homes. Condos in areas like North Texas are excellent rental areas.
- Neighbors. With condos and townhomes comes neighbors which is good for investors. Having neighbors in close proximity cuts down on the potential for drug-related offenses more commonly found in single-family homes.
Risks
- Homeowners’ Associations (HOA) can present challenges for owners of rental properties. Not uncommon, HOAs can vote in special assessments to improve the community in some way. While sometimes these improvements don’t significantly increase HOA dues, some can skyrocket costing the owners thousands of dollars. This is something to be mindful of when investing in a community with an HOA.
- HOA boards can present other challenges, as they can be difficult to deal with. The homeowners in a condo or townhome residence don’t necessarily take kindly to investors who rent units in their community.
Single-family Homes
Benefits
- Long-term appreciation. Historically, single-family homes appreciate faster than condos townhomes.
- We can confidently say there will always be stronger demand for single-family homes. Turnover is also much less, as single-family homes are a more permanent solution and tenants don’t move as often.
Risks
- Single-family homes come with landscaping risk that a condo or townhome don’t have. As the owner of a property, you risk your tenant doing damage to the property that could end up costing you money.
- Capital expenses are higher and more frequent in single-family homes than condos or townhomes. For example, at some point a single-family home will need a roof replacement, or siding replacement and when this happens, it’s the investor on the hook to cover the cost. We recommend our North Texas property management clients have a capital reserve account for these types of expenses.
Both can be great choices for investment properties, we just advise creating a strong strategy and identifying which type of property will fit into your strategy best. Have questions? Give us a call, 469-731-5200.
