Investing in townhouses?

[Andrea Campo]

Hello everyone,

I recently moved to the US from abroad, I would like to start investing in real estate and I was wondering if investing in townhouses would be a good idea.

The pros are that there are many in my area, it's a very nice area (North of Pittsburgh, PA) so I wouldn't have to worry about problematic tenants and, they are almost all rent-ready or need very little cosmetic improvements. This would definitely help me overcome the fear of starting investing in a new country.

On the downside, cash flow is almost always negative if I put 20% down and considering the current mortgage rates. That wouldn't be a big problem for me, I have a good job and have no plans to leave it, I would invest to create wealth in the long term. But does it make sense?
I did some research, in my area a 2beds, 1.5 baths is about 200k and they rent for about 1.6/1.7k.

Just wondering if anyone is investing in this type of property, I'd be happy to hear your feedback.

Thank you!

Andrea

[Jason Wray]

Andrea,

Townhomes have Pro's and Con's and on the postive side they are managed through the association.  You do not have to worry about landscaping, exterior renovations/repairs or up keep on any pool or amenity. The taxes are generally lower and the insurance is under an HO6 policy which is cheaper than hazzard insurance for detached homes. 

The negatives are HOA fee's that can be higher due to lack of reserves or constant repairs etc. There can also be renter shock if there are other renters/owners who do not keep up their property, play loud music, or pose as a problem in general causing renters to leave.

I would run the numbers on the townhome versus a SFR or other multifamily options to see what the numbers look like with No HOA fee. More doors offer more cash flow and with having 20% down you can get into a SFR or any 2-4 Unit multifamily rental. I would look at apples to apples in regard to sale price.