Looking for a US rental investment, Do You Prefer Condos/Townhomes or SFH?

Question

Hi,

I am new here and so far loving the information. Some very knowledgeable people and property investors here.

I am a foreign investor looking to tap into the US property market while prices are low. I would be looking for something with a nice cash flow/net return and maybe some capital appreciation in a 3-5 years holding time. (Aren't we all)

My question is, do you look at or prefer condos/townhomes or SFH when purchasing this type of investment for a decent net rental return and a bit of appreciation. I understand, sometimes one may come at the cost of another depending on location.

The location I am looking at is Atlanta(Buckhead,  Lenox, College Park), and may consider Florida but rental yields don't seem as high as what I can get in Atlanta at first glance.

My budget is below $50,000.

If I am forgetting something please ask.

Ron Nawrocki · Answer

In my view SFH is far better investment with current mortgage regulations. Condos & Townhomes are not eligible for most conventional financing unless 51% of units are owner occupied.

Even if you buy for cash, you eventually will want to sell ... and selling to an owner occupant could be difficult.

Cash flow is also hampered by the very high HOA fees. When HOA fees were 10-15% of mortgage PITI it was no problem ... today their 50-100%

Todd Brittingham · Answer

Peter,

I agree with all the comments about about condos/townhomes.  The biggest problem I see is the HOA fees that just kill your cash flow.  Another thing to consider is that even if you are purchasing cash, you don't want to buy in a complex that doesn't have a high occupancy rate because if the units are vacant the HOA fees aren't being paid.  This means 1 of 2 things will happen...services will be cut or your HOA fees will be raised.  Needless to say there many complicating factors with condos and as such, single family homes are a much better option.

With your budget, you may want to consider the Michigan market.  We are putting together properties in Pontiac and Detroit Michigan that are ranging between $30,000 - $50,000 fully rehabbed and rented..  Rents are in the $600 - $900 range and we're seeing returns between 16% - 20% when you consider taxes, insurance and property management.  We are putting together section 8 tenants, land contract deals, along with everyday renters.  If you're interested in talking more please email me.

Thanks,
Todd

George P. · Answer

You need to understand that obtaining financing is not likely to be possible  with you being an out-of country investor.

Kofi LeGrand-Sawyer · Answer

Peter,

I don't feel that townhomes are better or worse than condos since the purchase criteria is specific to the building and local real estate market. A 1500 sf townhome in Dallas, Texas may sell for more than a 1500 sf condo in Orlando, Florida and vice- versa. This could be because the overall market is stronger in the respective community, or because the unit is located in a newer, better quality complex.

Gregory Childs · Answer

Peter,

We only consider SFH; they are much easier to manage and sell when you are ready to exit. It is simply a more liquid asset.
[SOLICITATION REMOVED]
TTFN,

Greg

Peter Seely · Answer

That was my next question Jet? Are townhomes better then condos to consider even though there is still the issue of HOA fees most times? Easier to manager, rent out and sell?

Hi Greg,

Don't know much about indianapolis market? Would have to research this. Depends on market rents in the area and current rents, unemploymnent rates, ressale history etc? Please do send pictures and location of home.

I will check out the link, thanks

Peter

Justin Case · Answer

How about townhome duplex?

Peter Seely · Answer

Thanks Jimmy,

Lots to think about. I am slowly researching properties but was until recently only looking at condos due to them being easier to manage from afar. However, after this post, it doesn't appear to be the smartest investment option for the most cash flow and appreciation. To many hidden costs and uncertainties.

Peter

Jimmy Oldrich · Answer

Lots of threads here on "out of state" investing, which appears more common here than out of country, but the issues are similar.  You can try searching on "out of state"

Peter Seely · Answer

Hey Deuce,

Thanks for your feedback. From my research so far it is next to impossible to find a SFH within my $50,000 budget after repairs in the Buckhead and Lenox area.

Maybe I would have better luck in Arizona or Florida or even Nevada? My worry there is the large amount of supply. I also agree, could it be that the prices are where they are meant to be, and the increases we will see will be based on inflation, of course give or take certain locations.

Either way, I have owned a condo in Calgary AB and that worked out well but for several reasons. I also own a condo in Brazil now which seems to also be doing well. It just seems like a whole different market right now in the US and I think the smartest thing would be for me to examine SFH but its new to me, therefore, makes me nervous. I can learn alot from this site I am sure, and already have.

I will start searching again but this time for SFH and see what comes up within our budget. I am also going to be managing this from away so any recommendations on how other investors do this would be appreciated.

Thanks
Peter

Looking for a US rental investment, Do You Prefer Condos/Townhomes or SFH?

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