Evaluating Non-HOA Townhome in Memphis

[Joseph S.]

I'm an out-of-state investor from CA investing in Memphis, TN and have come across a townhome without an HOA (something I've never seen before in CA). In speaking with my agent and property manager they advised that it's fairly common for Memphis townhomes not to have HOAs (about a 50/50 split). The property meets all of my investment requirements (A- neighborhood - 38125, strong cashflow, purchasing 10%+ below market value, no HOA), but since the property is a townhome I'm hesitant to pull the trigger. Here are some things that've come to mind:

Neighbor Issues - If the folks in the attached townhome are not quality neighbors there could be some real problems. What if they don't keep their property well maintained? I suppose you could run into the same problem anywhere with a traditional SFR, but having the property attached could make things far worse. What if they don't want to get a new roof at the same time as I do (so I end up just having mine done and then the others look even worse)? There isn't any required uniformity in paint color or landscaping so if the other owner wants to show their artistic flare I may have a very odd looking shared property. Again, something that could happen a detached house next door, but it seems to me the risk is amplified when the property is attached.

Vacancy - The property manager I'm working with advised me that in his experience he has seen that townhomes actually have equal to or less vacancy than a detached property because they typically require less yardwork.

Rental Value - I think we're safe on this one because it's part of a subdivision that has a number of townhomes that are rented and we're basing our expected rental value on their rental history.

Market for Resell - I would imagine that there is less demand for a townhome than there is for a detached SFR, however, the appraisal of nearby recent townhomes sales show that we are paying below market value so we should be ok here, right?

These are the thoughts I've had so far. I'd appreciate all of you folks with experience in the Memphis market to let me know how you approach non-HOA townhomes. Thanks!