You've asked a loaded question here! Every area is different and even within an urban area (I'm in Phoenix for example), there are pockets of areas where real estate investments perform really well versus those that don't, and they can literally be blocks apart. So, the first key is, if you don't intimately know an area, find a professional who does. Figure out what kind of return you want on your investment (ROI or cap rate, every investor is looking for something different based on whether you're paying cash, financing, etc.), and back into it. Any good agent will be able to tell you, based on what you have to invest and what you want your returns to be, how to back into the right property profile.
All that being said, it is my experience that single family homes work much better for investors. They command a higher rent (usually) and have a lot of advantages over the condo/townhouse property profile. When it comes time to liquidate, you will likely have a much better ability to sell the SFR versus the condo, and probably with better appreciation. In most markets today, you can get such great deals on houses that it's almost not worth it to buy a condo. Personally, I always push my investor clients to buy the SFR over the condo or townhouse, with very few exceptions.
FYI, I've pasted a link in below to a blog post I wrote on picking the best investment properties.
Hope this helps!
There is quite a bit that goes into evaluating a potential investment property. I do recommend you connect with a Commercial Broker (not residential) in order to get professional service for your investment.
You can start by looking at what rents(potential return) are going for in your area both for Condo's and Homes. Then at the prices for each (your investment). It's important to evaluate the demand for such housing, bringing into consideration the demographics as well.
There are good points to purchase when looking at condo's since the maintainence is covered by the HOA and the 'hands on" will be far less because of it. However, there is a cost for the HOA, just as there will be a cost for any maintainence on a home (deduct from income).
Again, Commercial Brokers have formula's for determining the end result (return on your investment) and that's what you REALLY need to see...befor you buy!
Best of Luck to you!
NYS Associate Broker
Keller Williams Landmark II
Single family homes are usually a better buy for an investor. You don't have the monthly home owner association assessments which can be the difference in positive or negative cash flow. As in investor you want (over time) appreciation to build and monthly positive cash flow to increase your ROI (return on investment). Plus with HOA's you will have some of your property rights restricted. Historically single family homes usually appreciate more than attached family units. Do you analysis on cash flow, appreciation, and demand for any property you may be considering. If the numbers work out go for it. Remember real estate is not a liquid asset so be prepared to be invested for at least five years or more. Another consideration is do you have any experience with renting properties? If not make sure you get up to speed by talking to others who are landlords prior to investing. Being a landlord is not for everyone.
All the best,