Thoughts on Condos/townhomes vs single family units from afar?

Question

Hi everyone,

Just working through learning as much as I can on the STR markets and trying to gage what most people think about condos/townhomes vs single family homes as investments...I'm trying to weigh the benefits of each against the drawbacks, knowing that I will be investing in a market (most likely) out of state (living in MI, looking at FL, TX, Gulf Coast region).

My thought is that a single family home STR will be more work to manage from distance but will also force me to learn quickly on all aspects whereas a condo might be a bit easier to manage but cash flow will be lower as most/all have fairly high HOA/dues.  Plus, it seems like differentiating the property to have a decent occupancy rate would be harder in a condo.

Anyone else worked through this, and what would you recommend to a new investor?

Melissa Bovee · Answer

When I was looking to buy in the Lake Tahoe area I did extensive analysis on the rental markets and found that cash flow was much higher for a condo.  It turned out (in my market at the time) that rental rates were much more stronly correlated with number of bedrooms than property type.  Therefore, I could command similar rental rates for a 4 bedroom condo and a 4 bedroom SFH, however the purchase price of a SFH was about double that of a condo.  I bought in an HOA that is very friendly to short term rentals (the entire area depends heavily on tourism).  My HOA dues don't kill my cash flow at all, and I love that someone else is worrying about snow removal, gardening, maintenance of the pool and hottub etc. The HOA is actually a perfect fit for me to be able to offer ammenities that I would not be willing to maintain remotely. I also love that if something crazy is going on at my unit (think water running into the street due to a burst pipe - this happened not at my condo but a place I once owned in Chicago) I know that the on site grounds and maintenance manager will text me right away. My experience with a condo has been great, so I wouldn't rule condos out.  When you are running numbers in different markets, include a condo or two to see how they shake out.  In my view there are a lot of benefits and if the numbers work, why not?

John Underwood · Answer

I would stick with a SFR that is not in an HOA. Something with a low maintenance exterior preferably.

This will cash flow better than a condo.

Kenneth Garrett · Answer

I would check the HOA rules.  Almost every HOA by me allows STR.  I am in a STR vacation area, so the economy is driven by vacation rentals.

Nancy Bachety · Answer

@Melissa Bovee nailed it. We have both types, LTR and STR condo, and LTR SFH and STR SFH. Key factor with an HOA no matter what type, is rules. We also choose a condo in FL directly on the ocean that is fully supportive of STR. Has been historically since early on. Year round demand, lot less maintenance issues and amazing cash flow. We choose deliberately not randomly. In fact, we bought from the seller, who first hosted us as Airbnb guests. She exchanged into a larger unit in the same complex and we exchanged into her unit.

We own SFH no HOA and the maintenance is more on us. Cash flow is great too but still have to look at the local regulations. All things being equal the maintenance is going to be more, no matter how good your automations and systems are.

That said, when you and your partner and your spouses go to visit, you’re more likely to “vacation” in a condo than you would be when you’re visiting your house. In your position, I’d find the right condo until you’re done with the corporate world.

Michael Beum · Answer

I own (3) and manage (4) STR condos in the Tampa area. I managed all these properties from NY for nearly 2 years. Condos and Townhouses are great because you don’t have to worry about external maintenance and they often come with amenities that you’ll pay a premium for in a SFH (pool, spa, gym, etc.). The flip side is the HOA. You have to find a HOA that is willing to work with Private owners and STRs. As others have stated the bylaws and restrictions are where you have to be careful. Linking up with a STR Property Manager in your target market can help you navigate the HOAs to avoid.

Eudith Vacio · Answer

Welcome @Mike McKeown - looks like there are pro's and con's to each. My advice if you consider investing in an HOA is to read all of the bylaws and rules because as a few pointed out here, there are HOA's that do not allow for STRs. I myself am considering investing in another state but I am leaning towards purchasing a condo with an HOA because they generally take care of all of the exterior maintenance and ensure that the building is in good shape and leaves all of the work out of my hands!

Jonathan Klemm · Answer

@Mike McKeown - I have a short-term rental in Chicago, which is a 2 flat so I rent one apartment out as normal and use the other as an AirBnB.  That way I get some of the STR revenue upside and avoid having to pay condo HOA fees.

Just curious why do you think a condo would be easier to manage than a single-family house?  For me, the system and process are pretty much the same.  I could see have less cap ex cost but the airbnb management is likely going to be pretty similar.  I use yourporter and pricelabs to help automate my unit.

Bruce Woodruff · Answer

I wouldn't buy anything that involves an HOA period...especially not if you are looking to do a vacation rental....

Kenneth Garrett · Answer

@Mike McKeown

I bought a SFR in a HOA in the Florida Panhandle.  No problems. Gated community, two pools, clubhouse, fitness center, etc.  I also self manage 1000 mikes away.  No problem it’s been great and very profitable.  Much better then the condos.

Tony Angelos · Answer

@Mike McKeown This is a great question. First thing to ask yourself is whether you're going to be self managing from afar or hiring a management company. If hiring a PM, the work expected may not be so different. In general, when you own the structure, there is more work. An HOA by nature handles certain things. The trick is finding an HOA that is friendly to STRs, and as @Melissa Bovee pointed out, nightly rates are generally more correllated with bedrooms than property types so just depends on you doing a little arbitrage to find the best value for your dollar.

Thoughts on Condos/townhomes vs single family units from afar?

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