is a townhome a good investment in today's market?

Asked by Leigh, Durham, NC Sun Mar 8, 2009

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Kerry Johnson, Agent, Chapel Hill, NC
Mon Apr 6, 2009
Hi Leigh, I think reasons for choosing townhome communities vary greatly. If you know that resale is going to be an issue for you then pay close attention to the location. In Durham the areas around the University and the hospitals tend to sell easier and enjoy a higher return on investment. I would be happy to answer any other questions you may have.
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Debra (Debbi…, Agent, Livingston, NJ
Mon Mar 9, 2009
Hi Leigh!
I just want to clear up some confusing statements that have been made, and try to clairfy your question.
Hope this helps!
First of all, a townhome is a STYLE - it is not a form of ownership. Single famiy homes are usually conveyed with deeds that are called "fee simple". That is one form of ownership. With another form of ownership, a condominium, you are given a deed to the property, which may include a few feet around the perimeter (if it is a townhouse style) - you OWN THAT UNIT, regardless of the style. In the 3rd type of ownership, a cooperative form of ownership, you are not given a deed to the property itself, but you are buying a PERCENTAGE of the building or complex.
A "condo" may be in the STYLE of a townhome (ie - free-standing, connected or multi-floors) or, it may be on one level, an apartment style, in a high rise building. Along the same lines, a cooperative may also be a townhouse style, or in a high rise building. All these terms are confusing to a lot of people!

When purchasing a condominium, you generally have the freedom to sell it to anyone you want. In a cooperative form of ownership, you will need "board approval" or permission, as you don't really own your own unit. This can add time and frustration to the process, Condominiums are easier to sell, because they are less restrictive. Both forms of ownership include monthly fees covering the common areas, although with a coop, the fee usually includes your portion of the property taxes. You are responsible for paying your own property taxes with a condo. There are bylaws, rules and regualtions for living in any of these types of communities. Associations and condo or coop boards come in all shapes and sizes...some are lenient, some restrictive. Discuss this with your realtor to decide what is best for your needs. Also keep in mind, every complex is governed differently, as to who is responsible for what. I showed a condo (townhome style) yesterday in which the owners is responsible for their roof and snow shoveling. This is rare, as in most complexes in my area that isn't the case. So be sure to ask for a copy of the bylaws ahead of time to clarify any of these issues!

In my area, condominium complexes are more prevelant than cooperatives, and are popular with first time buyers, and empty nesters, as they usually offer amenities such as pools, clubhouses and tennis. Many like the "care free" living a condo (or coop) offers. Buy what works best for you and your lifestyle. Everything is a bargain today.
Good luck!
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Scott Strick…, , Plano, TX
Sun Mar 8, 2009
As an Agent and Appraiser with over 20 years experience, I normally tell my Clients to follow these general rules of thumb. As a general rule, the first type of dwelling to go down in value when the market drops are Condos. This is largely due to the fact that you do not typically own the land in a Condo, only the airspace inside the Unit, plus a percentage of the common elements. The next to go down in value when the market drops are townhomes. Although typically you own the land underneath, the attached nature of many of these townhouse type dwellings makes them somewhat inferior vs. typical detached single family dwellings. This is my experience in the Texas Real Estate Market, in particular, the DFW area. Of course, as with anything in Real Estate, location and supply and demand can greatly affect these factors. Another problem with Condominiums in general are the high commonly shared expenses, which are not typically factored the same way as with Townhomes (i.e. you usually pay to replace your own roof on a true townhome, where in a Condo the "Association" pays the bill). Recently televised news about HOA dues going through the roof due to foreclosed units in Florida was alarming. As Condos are sometimes marketed as Townhomes, and vice versa, make sure you know the difference before you write the contract. The only way to tell is to make sure you will own a particular and indiviual piece of land in a Townhome (lot/block), vs. just a percentage of the common elements (with a Condo). Find a good Real Estate Agent/Attorney and a good Title Co. first to ascertain the legal aspects. Good Luck!
Scott Strickland
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Michael Colv…, Agent,
Sun Mar 8, 2009
Hi Leigh
I agree with the other post's , if you are buying it to live in, then now is a great time to buy. If you are buying as an investment then location is the key. I specialize in Durham and would be happy to answer any other questions you might have.
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Frederick C…, Agent, Durham, NC
Sun Mar 8, 2009
Traditionally a townhome has not been quite as good from a investment & appreciation standpoint as a single family home. This can of course vary depending on location and price. HOA dues can also be a important factor in deciding between townhomes & detached properties.

Fritz HIne
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, ,
Sun Mar 8, 2009
Hello Leigh,

The decision to purchase a townhome, condo or detached home is not as important as the location where you buy. Townhomes and condos can be good investments especially if you are planning to have tenants. Most townhomes and condos have a Homeowner's Association that will provide a most of the exterior and grounds maintenance. This allows investors to have a fixed cost and makes it a little easier to budget and manage your investment.

No matter what you purchase though, be sure to buy in a good location to give yourself the best chance for appreciation on your investment. Be sure to ask your buyer's agent to provide a comparative market analysis and pay attention the the number of days on market as well as the price/sq ft. In Durham, Woodcroft and Hope Valley are usually at the top of the list for communities with good resale.

Good luck!
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