With a nice, sizable layout, more privacy than apartments, and a lot to offer, townhomes can make excellent rental properties if you are looking for an investment. Here are a few factors to consider about any townhome you are considering before you make an offer as an investor.
1. What are the terms in which the townhome can be used?
Townhomes make excellent homes all the way around. They are usually located in great neighborhoods and in great locations, and they have a nice layout to support either family or single life. However, townhomes do usually have a governing HOA or other overseeing organization. This means the investment may come along with some restrictions when it comes to how the property can be used. Check into any regulations regarding subletting, renting, or leasing before making an offer on any particular home. As a side note, if you are looking to use a townhome for short-term rentals, such as for Airbnb or HomeAway, make sure you look into regulations that may exist that could prevent that possibility.
2. Are you planning to hold onto the townhome for rental for the long-term?
Townhomes are not necessarily the type of real estate investments you make in order to sell in the future to make a profit. For the most part, townhomes retain a stable value through the years. Plus, unlike a single-family or detached home, you can't necessarily build on or upgrade a townhome to enhance its value. For these reasons, investing in a property for a continuous income stream as a rental is a better idea.
3. What is the overall condition of the townhome?
Obviously, when investing in a rental property, you are going to want a home that is not going to require a large investment before you can start seeing a return. And, you do not want a tenant to move in and then start getting calls because of problems. Get a good look at the overall condition of the property before you decide to buy it.
4. How is the location of the townhome?
Think about who your target tenant will be. Make sure the location of the townhome coincides with the type of tenant you would like to rent to. For example, if you will be using the townhome as a vacation rental, look at the tourist-worthy attractions in the area and consider if the neighborhood would offer a place to stay that would make sense for a common traveler.