Supply and demand favors single family homes over condos/townhomes.
Have a condo, you are competing with thousands of other landlords for renters that are just as happy or happier with an apartment. Have a house, the renters are competing with each other to rent your house.
Here is how I have answered a similar question before:
Before setting up the search engine, what is your take on condos as hold and rent? One of my concerns before was the Association fees, but as I see that landlords are responsible for significant fees for homes (garden, pool, garbage, etc), I was wondering if condos might be a decent lower cost investment? -
The reason that we are renovating the condo for resale instead of holding it to rent out is that my particular HOA has a rental restriction amendment to its CC and R's. The restriction limits the number of rented condos in my HOA to a maximum percentage of 20% of the 176 condos in the Oak Grove Homeowners association. It is much higher than that now. If we rented it to someone we would be fined $100 per day.
So, you wouldn't purchase a condo in a HOA like that.
Some HOA's have construction defect litigation, or litigation of any kind. Those are complicated affairs. For a cash investor, the upside is that present value of a condo in litigation is significantly depressed and the units can be picked up cheap. The downsides are that the litigated HOA's have extremely limited financing opportunities which condemn them to having a smaller base of potential near time buyers. Mainly cash buyers. Low demand leads to lower prices. This also increases the rental percentage of occupancy to a higher than average level. The upside is that years into the future the gamble could pay off handsomely, once the litigation is settled and the condos in the HOA can be financed again. (provided paragraph 4 is not a problem)
HOA's that have high rental percentages, have limited financing opportunity due to non-owner occupancy limits in the underwriting guidelines of FHA, FNMA, Freddie Mac, Mortgage Insurance companies and funding lenders themselves. These restricted financing opportunities lead to lower demand thus lower prices.
HOA's that have deferred maintenance, and / or an inadequate maintenance reserve budget, may be in danger of incurring a special assessment, may also be bargain priced and may also be boycotted by the lenders.
Now that I am done scaring the bejee out of you. - a condo could be good investment. You have to analyze the risks for the association in addition to analyzing the unit itself.
Condos are significantly lower priced than comparable single family homes, of similar square footage, amenities, and neighborhoods, I view them as higher risk, investments than single family homes.