Are townhomes a good real estate investment?

Question

I wanted to know if townhomes are a good real estate investment. I've heard mixed reviews from different sources. For instance, I've heard that in a bad market, these types of properties depreciate the most. I also heard that they are harder to resell and get the full value out of them. Does anyone have any experience with this?

Answer 1

IN GENERAL, townhomes do depreciate more than single family homes in a bad market...and, you typically do have more difficulty getting your money out of a townhome than you do a single family home.

The big problem with townhomes is that they often cost just as much as a single-family home...yet don't offer anywhere near the amenities. With a townhome, you typically get little-to-no yard, you have to deal with at least one common wall, you're forced to pay sometimes exhorbitant HOA fees, and you don't usually own the ground that it sits on. So, on it's face, a townhome really DOESN'T look like much of an investment.

However, that's not the whole story. Really, (like everything else in real estate) alot of this depends on the location. For instance, if you're talking about a townhome on Miami Beach, then it could be a huge money-maker and a great investment. However, a townhome in Grand Forks, North Dakota would be right up there with Enron and MCI WorldCom stock as a bad investment.

You need to look at the specific real estate market that you're considering investing in and ask yourself some of the questions that others here have mentioned....

Answer 2

Are Townhomes A Good Investment

Answer 3

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RE:
Are townhomes a good real estate investment?
I wanted to know if townhomes are a good real estate investment. I've heard mixed reviews from different sources. For instance, I've heard that in a bad market, these types of properties depreciate the most. I also heard that they are harder to resell and get the full value out of them....

Answer 4

it is a crap shoot sometimes. what you need to pay attention to is the area itself. is it on the move? are there lots of homes being built there? is it an old area with not much activity etc. these will give you good indications on how the area is doing. real drawback to townhomes is that they can cost as much or the same as a regular detached family house. so it comes down to why spend money on a townhouse, when you can have your own little yard and such for the same price. if there are old houses around, and lots of them, and new townhomes are being built, it's a good decision to pick one up. if the area has lots of homes, townhouses, condos etc, gotta keep an eye on the area first. also, the townhouses on the ends will always sell faster than the ones in the middle.

Answer 5

I beleive it's relative to the market. In my market we have lots of tourists and property isn't always lived in year round, on the other hand lower priced homes are usually shielded a bit because there are always entry level buyers.
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Answer 6

Like any real estate, it depends. I live in a townhouse that I have owned for over 18 years. The original purchase price was $57,000. The value today is $120,000. I clipped and saved real estate for sale ads for townhouses in my development. The ads show a steady increase in sales prices over the years.
There is a townhouse development just to the south of mine. Prices in that development have always been a few thousand dollars higher than the prices in my development.

Answer 7

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Answer 8

In this Market its the town homes which are Booming and normally you wouldn't find any of them for a reasonable price , Feel free to visit us for any kind of real estate deals http://www.candorealestate.net/

Answer 9

How to value a property during market downturn?

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.