Real Estate Investment Property Spotlight: Townhomes

October 15, 2020

Real Estate Investment Property Highlight: Townhomes Featured Image

Townhomes are a great investment property for new investors and seasoned professionals alike. With their affordable pricing, it’s easy to get into the investment game and start building your real estate empire.

Learn more about what makes this home-style unique and such a great choice.

What Do Modern Townhomes Look Like?

Sometimes called “row houses”, townhomes are built together in a row. This means that they all share at least one side of the home with a neighbour, which cuts down on the overall cost of the home. At the same time, modern insulation and building techniques give the townhomes privacy. You won’t have to worry about the noise from the neighbour’s home travelling through the walls.

New townhomes reflect current trends in home design. You’ll find an open concept living area, with stylish details like quartz countertops and a ceramic tile backsplash in the kitchen. Upstairs, there’s usually a master suite with a bathroom and walk-in closet. In many townhomes, you’ll even find a laundry area on the second floor.

Townhomes don’t generally come with huge backyards, but it’s easy to find a townhome floor plan that features a patio or balcony area, so that residents can still have a place to relax outside.

Basically, the townhome has everything that most renters are looking for.

Real Estate Investment Property Highlight: Townhomes Patio Image

Potential for Added Income

If you want to really ramp up the earnings you could make from owning a townhome, you want to look at the potential for having additional income suites in the home. For instance, you’d want to choose a floor plan that allows for an income suite in the basement or above a garage in the back, if there’s one available.

In such a case, you can double the income that you’re bringing in, but you’ll only be responsible for one mortgage.

Buying Multiple Townhomes at Once

We’ve already mentioned that the price of a single townhome – just one of the homes in the row of townhomes – is significantly more affordable than other styles of homes. Sometimes this means that the investor can buy two townhomes next to each other, or even the entire row of townhomes!

If this is a possibility for you, it’s a very smart move. You’ll be able to consolidate your holdings into a smaller area, and when it comes time to do maintenance and repairs on the home, you’ll be able to save money by having the workers do each of your homes in succession.

Real Estate Investment Property Highlight: Townhomes Living Room Image

Appeal to Renters

Townhomes are particularly appealing to renters. With the cute exterior and parking out back (sometimes, even a garage), these homes definitely have a house-like feel that’s better than what you’d get in a large apartment or condo complex. There’s space to entertain, and space for kids to have their own bedrooms. There’s often more storage space as well. Tenants could find this by renting a larger house as well, but townhomes tend to have more affordable rental rates. It’s within reach.

A lot of tenants also appreciate the low maintenance lifestyle they can lead when renting a townhome. Typically, they won’t have to take care of the landscaping or snow removal from a long driveway, like you might have to do in a larger rental house.

All of this is incredibly appealing, and it means that you won’t have to worry about renting out your properties.

Real Estate Investment Property Highlight: Townhomes Bedroom Image

New Construction Over Resale Homes

Once you’ve decided that the townhome style is the right one for you, you’ll have to think about whether you want to purchase resale townhomes or new construction.

In general, resale homes are going to have a lower asking price. That looks good on the surface, but what is the condition of the place? Will you have to make a lot of repairs, and how much will that cost you? Is the design of the home attractive or is the design so outdated that you’ll have to make updates before anyone will want to rent?

When you choose new construction, you’ll get homes that are ready-to-rent. It’s also usually a lot easier to buy more than one townhome in the row if that’s an option you’re considering.

Possible Cash Flow

This might all sound great, but what kind of cash flow is possible with a townhome? It all depends on the specifics of the home you buy. Fancy upgrades in the home may not get you a higher rental rate, so be careful in how you budget your money in a new build home. As we mentioned before, if you can add additional units in one home, you also have an opportunity to earn more.

We can take a look at one example that’s pretty typical of the townhomes we sell. Let’s say that the overall purchase price is $389,900, and that includes a separate basement suite, so you have two units in the building. You could probably rent the main floor for $1,400 a month and the basement suite for $800. Your mortgage expenses – including taxes and insurance – are going to be about $1,755. This gives you a monthly cash flow of $455. 

Clearly, townhomes offer a lot of potential to real estate investors. Why not let Sterling Homes show you how easy it can be to get started?

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