When you decide you want to invest in Nashville real estate, one of the first things you’ll have to decide is what type of property you’re going to buy. Generally, investors will either shift towards buying a single-family home or a small building with multiple apartment units.
Let’s not forget the other options: condos and townhomes.
We actually think that these can be the best types of investments, especially when you consider how attractive they are to tenants in the Nashville market. Single-family homes are great, but they’re more expensive, they don’t usually provide amenities, and there’s often extra maintenance and upkeep for both owners and tenants to worry about. Units in multi-family or apartment buildings also have their benefits, but a lot of tenants shy away from renting those homes because they want more space and privacy.
A well-maintained condo or a townhome in a community with a pool or a clubhouse can deliver the best of both worlds to investors as well as residents.
Let’s talk about why condos and townhomes make such excellent investment opportunities in Nashville. Here’s our guide for savvy investors.
Defining Property Types: What’s a Condo? What’s a Townhome?
A condominium is individually owned. It’s not like an apartment, where the entire building is likely owned by one person or company. When you buy a condo, you’re investing in the property itself and not the land that it’s on. The owner of all the condos on a piece of property jointly own that land; you own only the interior of the condo and any private outdoor space that comes with it, such as a balcony or patio or courtyard. Typically, by owning a condo, you’ll automatically become part of the condo association, which is tasked with maintaining the communal land, exterior features, and shared amenities and spaces.
Townhomes are often a little bit trickier to define. A townhouse, or townhome, is usually a multi-story home that’s technically a single-family dwelling, but shares at least one wall with a neighboring home. Shared walls between townhouses are also called party walls. There must be open space on at least two sides of the home (presumably, the front and back). There may be an HOA involved when you own a townhome.
There are several similarities between condos and townhouses. Like townhouses, condos are often attached via one or two walls to other housing units and are typically governed by an HOA. Additionally, these types of units likely have access to community amenities.
Unlike townhomes, condos are single units that make up a larger complex. This tells you that condo owners are more likely to have neighbors above or below their homes. On the other hand, townhomes are defined as single-family dwellings that happen to share walls with another home (or two homes) but are considered more private than condos.
Benefits of Investing in Condos and Townhomes
So, why do we recommend these property types for investors who are considering the Nashville market? Here are some of the best reasons to consider them:
- Lower Maintenance Costs
Condos and townhomes usually come with lower maintenance responsibilities compared to single-family homes. Homeowners’ associations (HOAs) often take care of exterior maintenance, landscaping, and communal areas, reducing your upkeep costs. You’ll spend less time hiring landscapers and trying to improve your curb appeal when you’re renting out a condo or a townhome. While you’ll still have some control over the front of the home and the appearance of the property, you won’t have to pay for regular mowing or snow shoveling. That’s why you have an HOA or a condo association.
- Attractive Amenities
We especially like the amenities that many condominiums and townhome communities offer. You’ll find that there are generally clubhouses, pools, gyms, and security services. There may be tennis courts or pickleball courts or even dog parks. Most communities where you find condos and townhomes are well-landscaped and pleasant to spend time in. These features not only enhance the living experience but also increase the property’s rental appeal. You’ll have an easier time attracting tenants to your home when you can advertise that there’s a pool or a fitness center included in the rent. Prospective residents will appreciate not having to pay for a gym membership because they have all their favorite weights and machines right there in their community.
- Quality of Life
Investing in condos and townhomes will help you appeal to renters who are looking for a high quality of life that includes activity and engagement. Condos and townhomes are often located in urban areas, providing easy access to work, entertainment, and public transportation. This urban living appeal attracts a wide range of tenants, ensuring a steady rental income. A lot of tenants today are looking for walkable neighborhoods, and a downtown townhouse can provide that.
Key Considerations for Investing in Nashville’s Condos and Townhomes
Just like with any investment property, you have to do your due diligence to make sure you’re buying what will be a profitable investment. Don’t buy something just because it’s a condo. Make sure it’s a condo that people will want to rent. Make sure it’s a condo association with rules and regulations that you’re willing to live with.
Make sure these property types fit your investment goals. As rentals, both condos and townhomes have the potential to earn great income. But, you’ll have HOA fees to pay, most likely. You’ll have to think about your exist strategy and your resale value.
Here are some of the factors to consider before you take our advice and buy that condo or townhome.
- Always Important: Location, Location, Location
When investing in real estate, location is paramount.
This is always true, whether you’re buying a condo or a single-family home or an entire apartment building. As you consider the location of your investment, focus on areas with strong job growth, good schools, and convenient amenities. Popular neighborhoods in Nashville include The Gulch, East Nashville, and Germantown. You’ll find both townhomes and condos available in these areas, and you’ll likely enjoy high rents and long-term appreciation.
- Property Condition
Don’t buy something that isn’t in good condition. You may be willing to make some cosmetic improvements before listing it on the rental market, and that’s a fine idea. But, if you need to invest a lot of time and money just getting the property ready for the rental market, you might want to look at something else. The idea is to buy a profitable property, not one that you hope will do okay.
- Partner with a Nashville Property Management Team
Effective property management is crucial for maximizing your investment returns. Partnering with a reputable Nashville property management company can help you retain high-quality tenants, handle maintenance issues promptly, and ensure seamless rent collection. Your property manager can also help you make a smart investment decision. We have access to data and insights that can tell us what a condo is likely to earn in rent or how much maintenance a townhome will need over the next five or 10 years. These are good analytics to have before you buy, so partner with your property manager early.
- Understand HOA Fees and Regulations
Be sure to understand the homeowners’ association (HOA) fees and regulations associated with the property. High HOA fees can eat into your profits, while strict regulations might limit your ability to make property improvements or rent it out. Find out what sort of insurance is provided by the association, and whether there are limits to the number of rentals or the length of time in which you can have your property rented to tenants. Every HOA and condo association is different, so spend some times perusing their bylaws and other governing documents before you commit to a specific property.
- Consider Financing Options
Explore various financing options to fund your investment. Consider working with local lenders who understand Nashville’s market dynamics. Look into traditional mortgages, FHA loans, and investment property loans to find the best fit for your financial situation. There are a lot of ways to finance and investment property, and certain property types are better suited to certain loans. Compare the costs and the payback terms of each option. While interest rates in the middle of 2024 are higher than we’d like them to be, it shouldn’t keep you from investing when you find the right property. There will always be an opportunity to refinance later.
Investing in Nashville’s condos and townhomes can be a fantastic way for savvy real estate investors to earn impressive returns in both the short term and the long term. The city’s thriving economy, cultural allure, and robust property market create an ideal environment for long-term growth.
By carefully considering location, property management, HOA fees, and financing options, you can make informed decisions that yield profitable returns.
We like condos and townhomes as investment properties for all these reasons and more. Let’s talk about your unique investment goals and take a look at how the current inventory can support what you’re trying to do. Contact us at Apex Ventures, Inc.
