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Townhouses or condos purchased as investments tend to be a mixed bag. Wise HOAs will have rules limiting or forbidding the rental of units. The reason is that non-resident owners tend to favor lower HOA assessments as a way to maximize their profit. This causes the community to defer/neglect maintenance, which negatively effects all the owners.
If there's too high a percentage of rentals in a community banks may refuse to lend there and/or the loan may not be sell-able on the secondary market.
If there's too high a percentage of rentals in a community banks may refuse to lend there and/or the loan may not be sell-able on the secondary market.
Never heard of that before. Why would a bank care if the loan is being paid on time?
Never heard of that before. Why would a bank care if the loan is being paid on time?
Increased risk of non-payment.
It is too easy for an investor to walk away from a property when it is not the primary home.
That is why investment properties require more down payment and a bit higher interest rate, too.
If a community declines in value, it becomes more likely that investers will just walk away.
Additionally, if the Owners' Association is financially dependent on a small group of owners for an outsized portion of the dues payment, "too many eggs in one basket," there is higher risk of insolvency if only one or a few owners walk, go bankrupt, or do not pay for any reason.
That is why any condo purchase should be analyzed in terms of FHA warrantability, meaning conventional lending is available and that complying loans can be resold.
Townhouses or condos purchased as investments tend to be a mixed bag. Wise HOAs will have rules limiting or forbidding the rental of units. The reason is that non-resident owners tend to favor lower HOA assessments as a way to maximize their profit. This causes the community to defer/neglect maintenance, which negatively effects all the owners.
If there's too high a percentage of rentals in a community banks may refuse to lend there and/or the loan may not be sell-able on the secondary market.
I live in a townhome community - priced somewhat on the higher side ($300-400K. At one of our HOA meetings, someone proposed setting a limit on the number of rentals (keeping it 10% or less) but this was voted down.
Doesn't really matter anymore as we just went under contract to sell. Closing July 19th.
Increased risk of non-payment.
It is too easy for an investor to walk away from a property when it is not the primary home.
That is why investment properties require more down payment and a bit higher interest rate, too.
If a community declines in value, it becomes more likely that investers will just walk away.
Additionally, if the Owners' Association is financially dependent on a small group of owners for an outsized portion of the dues payment, "too many eggs in one basket," there is higher risk of insolvency if only one or a few owners walk, go bankrupt, or do not pay for any reason.
That is why any condo purchase should be analyzed in terms of FHA warrantability, meaning conventional lending is available and that complying loans can be resold.
yes, exactly this. this is what happened with the HUE condos in downtown raleigh. they had some people under contract for purchase but lenders would not lend until something like 75% (??) were to be purchased in order to protect their investements.
The safer bet is the 1000-1400 rental price range. It's harder to rent out $1800-2000 townhomes.
So you have to be more careful about what to buy.
The 140-180k segment is hot for townhomes. You can buy one and get a 3.75 30 year mortage.
Cheaper than renting for a lot of people.
Yep! I would like to sell our townhouse. It's on the higher end of the hot bracket. Husband wants to hold it as investment property.
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why?
