Investments are a way to get your money to work for you. They can lead you to your financial goals and build your wealth. There are several ways to invest your money, with real estate being one of them. This article will highlight tangible real estate investment strategies and how they can contribute to your financial success.
Townhomes and condos… what’s the difference?
It’s important to note the similarities between townhomes and condominiums, but even more important to remark on their stark differences. What do you need to know about these two investment strategies? Let’s dive into townhomes first.
Townhomes are an attached-style home typically owned by its residents. They are typically multi-leveled homes that share one or two walls with the attached properties. But unlike a condominium, each townhome has its own entrances. Purchasing a townhome is a lot like owning a single-family home. You’ll personally own your section of the structure and the land it sits on.
Condominiums are also owned by its residents or investors. The style of a condo is similar to that of an apartment building. There can be several condominium units on one level of the building. When you purchase a condo, you own your own individual unit as well as sharing joint ownership of the building with the other residents. Common areas within the condominium community are shared. The community may have a pool, gym, indoor recreational areas, dog parks, etc.
What are the similarities?
In the section above, we’ve noted that townhomes and condominiums have quite a few similarities. As an investor, it is important that you know all the facts before you make a decision on what works best for you.
The cost. Townhomes and condos are generally cheaper than single-family homes, because the footprint is smaller and you’re sharing a wall with other homeowners.
Maintenance and amenities. The smaller the size of the townhome or condo, the less maintenance you’ll probably need. Homeowners Associations come into play here, too. Your lawn care, snow removal, and exterior appearance might be up-kept by the HOA. For some homeowners, this can be an attractive pull towards purchasing a townhome or condo. Townhomes and condominiums may have amenities, like a pool, walking trails, or a recreational center.
HOAs: What you need to know
What is a Homeowners Association? Some residential communities have an association that has regulations set in place to keep up the ambiance of the neighborhood. “Many townhome communities and condominiums have an HOA structure set up,” Says Seth Evans, Real Estate Investment Advisor at RPM Iowa.
“HOAs have a monthly fee that residents will have to pay,” Evans says. “This covers the cost of maintaining the overall appearance of the neighborhood.” Some homeowners don’t want the responsibility of keeping up their lawn, or shoveling when winter comes along. HOAs will sometimes cover roofs and exteriors of the structures.
But what does that mean for investors? “Some HOAs have rules and regulations against renters,” Warns Evans. “If you’re interested in going the route of buying a townhome or condo, you will want to look into that first.” Some HOAs won’t allow investors to buy in their neighborhood.
Fees for HOAs range pretty widely. The size of the development and the kind of amenities available can factor into the monthly fees. However, HOA fees can change whenever the association deems necessary. There aren’t many structures in place for how often or how much an HOA can increase their fees. You can ask a potential HOA for a copy of their dues from the past 10 years to get a better idea of what to expect.
Are townhomes and condominiums good investment strategies?
Townhomes and condominiums can be a good investment strategy path, if everything lines up the way that it should. You may have to do a little extra research with your REIA. Research the HOA in the neighborhood you want to invest in. Will you be able to make cash flow on this property, or just break even? These are questions you need answers to, similar to that of any other investment strategy.
“If you’re in the position to build a community, that’s a great way to build wealth through real estate,” Evans mentions. “If you go the new build route on townhomes or condominiums, you can set the tone for the neighborhood. And even create your own HOA if you want.” It may seem overwhelming at a first glance, but building a community of townhomes or condominiums could be a plausible route for you. Check in with your REIA to see if it is.
There is no one right way to invest in real estate. That’s why it’s so essential to talk to real estate investment advisors and professionals to mold the pathway that works best for you.
Have you read our first article of this series that highlights different real estate investment strategies? You can find it here.