Are Condos, Townhouses, and Patio Homes Good Investments?

Published December 6, 2011

In today’s topsy-turvy real estate market, many so-called experts will tell you that single family real estate investment properties are the only ones the investor should consider at present.  The traditional way of thinking was that condos and their cousins, the townhome and patio home, are the first type of property to drop in value when the real estate market tanks, and the last type to gain a foothold when things turn around. But for the buy-and-hold investor, especially in Phoenix and surrounding Arizona areas, condos need not be avoided.

When investing in Arizona, particularly with the intention to hold on to the property for several years, condos can be a wise investment choice for a number of reasons.  The first priority for the investor is to find good tenants and hold on to them.  There are several tenant profiles that distinctly prefer condos and townhomes over single family properties.

Young professionals, especially single people and couples without children, often seek the simplicity of townhome life.  This demographic often spends a large portion of their lives dedicated to their careers.  The rest of the time, they prefer to pursue the vast array of recreational and leisure activities that are so plentiful in Arizona.  The last thing they want to do is house or yard work.  They typically seek a smaller square footage with modern finishes and amenities.  These lucrative tenants want locations that are close to hip and popular restaurants and nightclubs.  The investor will find many excellent investment opportunities in these areas, where developers built lofts and modern condos by the hundreds just before the market crashed around 2006.

The next tenant demographic that prefer condos and patio homes is the older set.  Again, these are single people or couples whose children are grown and gone.  They also want to pursue a more leisurely life, away from the home and yard work that dominated their child-rearing years.  They seek to downsize and often enjoy the social opportunities that are present in many of the “snowbird” locations around the Phoenix Valley.  To attract these tenants, who might be the best tenants of all in terms of responsibility and reliability, the investor should look for those properties that attract winter visitors and that have golf and other leisure opportunities nearby.  Excellent buys can be found in Scottsdale, parts of the far East Valley such as Gold Canyon and Apache Junction, and in both the Northwest and Southwest areas of the Valley.

Whereas the price of single family homes has skyrocketed over the past few months, excellent buys can still be found on condos, townhomes, and patio homes.  The investor must be sure to consult with a licensed Realtor to determine which areas command the highest rent, attract the best tenants that fit the desired profile, and will provide the highest return on investment (ROI).  It should also be noted that condos will likely appreciate later than single family homes, so these properties are excellent for the investor that seeks real estate to add to their portfolio and hold for the next few years.

Next up, what exactly IS the difference between a condo, a townhouse, and a patio home?

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