If I was going to invest ... unless this was a steal and I mean a steal, I wouldn't advise it. There are too many variables that go along with a self managed small town house complex that would not be in your favor. Just to name a few.. Higher repair cost per unit, lack of aggressive management style with respect to gaining capital and maintenance of the building. They may not qualify for FHA or any funding for that matter due to renting vs owner occupancy or whether or not have a healthy reserve. This could be a huge problem with regards to getting financing. So your concern is dead on... Your right about the thought of buyers lack of confidence in buying into those small complexes for basically the same reasons..I don't see this as a safe investment at all. If you want to invest, you would be better off buying into a larger complex if it is condos that you are interested in. Beware though, just because they are larger doesn't mean that 1, they can get all financing and 2, that they have the reserve or other requirements banks look for. There are many multi-families and single family homes in your area which your mortgage would be less than market rent. If I was to advise for best return in future I would say single, multi -families... even commercial... anything but condos in a small complex. Its just too high of a risk. If you have any other questions, feel free to contact me.
Gillis and Company
ERA Key Real Estate