Analysis paralysis - condo/townhome vs SFR

[Louis Barkhuizen]

Hello there guys and gals. I have been evaluating potential properties for STR in Port Aransas Texas, and have found two routes to go. Buy an SFR with no HOA to deal (ballpark SFR cost in Port A is around $400K), or buy a condo/townhome (ballpark cost in Port A around $290K)

From pouring over AirDNA data I see the SFR's on average earn slightly more revenue than condo/townhomes, but not a significant difference.

My ROI and CAP will be much better with the condo/townhome, and I can use the remaining funds to buy a second SFR :)

So my question is: is it worth dealing with potentially problematic HOAs in communities where SFR are allowed (eg. not taking care of deferred maintenance, or lackluster landscaping, etc). I have been advised by fellow investors to stay away from condos or townhomes.

Thanks for any replies.

[Keith Courtney]

Louis -

I am not familiar at all with your market, as I deal exclusively with short term rental vacation homes here in Central Florida in the Disney World area.  However, what I have witnessed here may help you with your market.

I try to guide investors away from condos here because they are more difficult and more expensive to finance.  There also is not a lot you can do to them to make them stand out against the competition.

Since townhouses are financed like SFHs, they are much easier and cheaper to finance. They normally are more profitable than condos as a rental, but you are still limited to what you can do to a townhouse to make it unique and stand out against the competition.

SFHs are the best option here because of ease and cost of financing and the potential for profit.  The most profitable rentals here convert the garages into air conditioned movie theaters or game rooms, which obviously you can't do with a condo or townhouse. And, usually a home has other common areas where other fun amenities can be added to the home (i.e. large tvs with Xbox and PlayStation).  I have found that many vacationers who come here will pay more per night and rent a home more often when a home has been renovated and loaded with of these types of fun amenities.

Good luck with whatever you decide.

Keith