Is Townhouse A Good Investment?

Fancy trying your hand at becoming a real estate mogul? A steadily recovering housing market for the budding investor means there is no better time than the present to start building your portfolio.

The perfect entry point, a property such as a townhouse, provides an inexpensive and hassle-free investment option. And with demand currently outstripping supply in the Australian market, new and existing townhouse owners can likely expect to experience more significant capital growth—a win-win in our (finance) books.

What Is A Townhouse?

Townhouses are also known as rowhouses. They’re different from detached houses in that they’re attached to other properties. They’re also different from condominium complexes, even those with multi-story, attached homes as part of the complex.

When you purchase a townhome, you typically own the home, the house’s exterior, and the land the home is on, including back and front yards. When you purchase a condo, you only own the condominium unit. And when you are buying a home, you don’t have maintenance and amenity fees, which we’ll talk more about next.

Townhome complexes have common spaces. These are shared distances between all the residences of the complex. At Home Builders, we have the best dual occupancy selection to make your house a dream come true.

Townhomes usually have maintenance and amenity fees that go toward caring for those common spaces in different ways. They may also have a homeowners association (HOA) that organises maintenance and landscaping. They might also be responsible for snow removal, pool care, and scheduling the use of the clubhouse or event rooms.

In some cases, an HOA will also set guidelines and rules for your home and yard aesthetics. They may enforce the use of permits and other community-set regulations.

Benefits Of Buying A Townhouse

In some cases, a townhouse can be an intelligent choice and investment. Here are some of the things you’ll benefit from:

  • A lower purchase price
  • Easier maintenance
  • Common area amenities
  • A sense of community.

Townhome Melbourne

A lower purchase price

Buying a townhouse isn’t always cheaper than buying a detached home. But if you’re comparing a detached house and a townhouse in the same neighbourhood with roughly the same interior and updates, then you’ll generally spend less to buy the townhouse. The reason? It’s cheaper to construct properties that share walls than it is to build them separately so that savings are passed on to you.

If you don’t have a vast homeownership budget, then a townhouse could be an excellent, affordable choice. And if you’re looking to invest in an income property, it’s a perfect way to purchase a second home without having to come up with a sizeable down payment.

Easier maintenance

When you buy a detached single-family house, you’re responsible for a world of exterior maintenance. You need to maintain your property’s lawn, arrange for snow removal (or shovel yourself), and do the many other things owners of detached homes do. When you buy a townhouse, you generally only need to maintain your home’s interior because your HOA will often take care of exterior upkeep. And if you’re a first-time homebuyer, a townhouse may be a solid stepping stone if you’re unsure how much upkeep you have patience for.

Common area amenities

Many townhouse communities offer standard area amenities that could enhance your quality of life. As part of your HOA fee, you may be entitled to perks like a playground, swimming pool, gym, tennis court, or clubhouse, where you can entertain guests.

A sense of community

Townhouses, by nature, are close together, which means you may have an easier time getting to know your neighbours. That’s a good thing if you’re the social type who enjoys interacting with others

Benefits of renting a townhouse

If you’re looking to rent a home rather than buy one to live in, a townhouse is worth considering as well for these reasons:

  • Lower rent
  • Extra amenities
  • A community feel

Lower rent

Because townhouses tend to be cheaper to buy than detached homes, owners who choose to rent them out will typically charge less rent. That could translate into serious savings for you. Renting a townhouse could be a good solution if you have a family and need more space than an apartment allows for. And if you want an affordable home with outdoor space, a townhouse could provide that.

Extra amenities

When you rent a detached house, you may get access to a front lawn and backyard and maybe a pool — but that’s generally about it. With a townhouse, you may gain access to a playground for your kids, a gym to work out in, and other such perks. Looking for dual occupancy? Look no further! Home Builders has you covered. 

A community feel

If you’re new to the area or are still feeling it out, a townhouse could help you better understand some of the people who live in your neighbourhood. And if you enjoy being social with neighbours, the fact that you all share the same common areas will help in this regard.

Is Buying a Townhouse a Good Investment?

Consider Your Lifestyle

If you are considering a townhouse as your next home, you will be glad you invested. One of the main benefits of townhouse living is that it will complement your lifestyle. They are often close to shopping centres, restaurants, and other areas of recreation.

In today’s real estate market, contemporary-style townhouses are becoming more popular among young people. Construction companies are constantly developing areas to build more of them to meet market demands and population growth.

The Aesthetics of a Townhouse

A townhouse has a very prominent multi-level design that makes it stand out among other housing structures in the same area. This is mainly due to its upward structural appeal that prioritises saving space at the expense of a backyard or front yard. One way to consider the purchase of it to be a good investment is to ask yourself whether the townhouse’s design will be convenient for you.

Townhouses, unfortunately, lack some of the perks of a traditional family home like a large front lawn or a spacious backyard, and its compact form factor can be a dealer breaker for potential buyers, so it’s essential to consider the design aesthetics of a townhouse before signing any documents or lease agreements.

Pay to Rent or Pay to Own

The best feature about deciding to live in a townhouse is you have the option to pay to rent or pay to own, which is a top-selling point for people who like to have options when considering moving into a new living space. This is an immediate advantage over regular apartments that rely heavily on a rent-only model most of the time. For the family that is just starting, a townhome can make the perfect housing arrangement for kids and small pets. Your real estate agent will be of great help in advising prospective buyers on the best option that meets their housing needs.

Melbourne Townhomes

Why Would You Consider Investing In A Townhouse?

As populations increase and land becomes more scarce, the demand for townhouses is rapidly expanding. Many people see their low-maintenance nature as providing a break from the fast-paced modern society.

When choosing an investment property, it’s essential to look through the eyes of a tenant. Those renting a townhouse should be able to reap the benefits of close-by community amenity and a nearly maintenance-free environment. 

The leading demographic in tenant-filled properties, millennials are starting to fill out the housing market in both a purchasing and renting capacity, bringing with it a generational demand for sustainable housing options. Through their space-clever designs, townhouses are fantastic at minimising energy usage and reducing residents overall carbon footprint, making them an attractive option for eco-conscious individuals.

More inexpensive to buy and great for retaining value

By using land more efficiently, townhouses come in much more inexpensive than free-standing homes, which, to many, provides an attractive prospect of long-term capital growth. Historically, housing prices tell us that if a dwelling is located in a well-connected estate, it will retain its purchase value, which ideally should make for a seamless re-sale. 

Due to their low price point (and therefore lower financial risk), banks are also more likely to look more favourably at funding an inexpensive new build than an expensive established home. For those worried about build costs and complicated loan processes, our 10/90 contracts (detailed below) mitigate any stresses associated with a regular split contract—helping you obtain finance.

Built with liveability in mind

Built with liveability in mind, master-planned communities are developed with a focus on accessibility, with public transport, shopping and schools all within easy reach. Forming part of a row, each property has been carefully considered to maximise the relationship with surrounding homes, ensuring the best outcome for each lot.

Many investors opt for established housing due to the complications that come with financing a build. Typical off-the-plan purchases structured as split contracts can prove daunting, as it means the land and construction need to be paid separately, and therefore, lenders will need to agree to finance both of these payments.

A hot point for investors, our unique 10/90 contract structure combines both the land and townhouse build costs, plus it means you’re not required to make repayments throughout the build like you would on a traditional construction loan. You pay 10% of the total package price upfront and the remaining 90% on completion. If you’re looking to acquire something brand new, this is one of the main benefits of investing in a townhouse. You’ll be able to secure renters before even having to make a repayment, meaning you’re not out of pocket each month for the duration of the build!

Enjoy a simple, stress-free process.

Another big pro to investing in a Porter Davis townhouse is we generally don’t sell these homes under a strata title (although again, this is dependent on our agreement with the land developer). This means that you don’t have to deal with the strict bylaws that people in dwellings such as apartments do, and it’s less likely you’ll be paying body corporate fees. There’s also a reassuring sense of simplicity; you get all the quality of a Porter Davis to build but in a much more condensed process. Choose one of two professionally designed World of Style interior themes, and let us do the rest. Plus, enjoy real-time access to the status of your build with our Medium Density Customer Portal. At Home Builders, we offer a wide range of duplex build.

Overall, connected convenience and a simplified build and finance process are the main reasons to consider a townhouse investment. You can rest assured that, more than ever, there is a steadily increasing demand for these properties as couples, young families, and downsizers continue to seek low-maintenance and affordable homes in the areas they love. 

To understand if a strata-titled property is a good investment, it is essential to understand precisely what ‘strata title’ means. Some of the main features of strata-titled properties include:

  • The title grants ownership of a section or ‘unit’ of a larger building or development;
  • The property can be sold or transferred by the owner;
  • Shared walls, floors, ceilings, facilities and common areas;
  • The complex may include many different types of properties, such as apartments, units, townhouses, villas, duplexes and triplexes;
  • As the owner of a strata-titled property, you become a member of the strata company, which entitles you to participate in the management of the overall property;
  • Owners must abide by any bylaws (or rules) of the strata company;
  • Owners must pay levies to administer the strata scheme, such as insurance, maintenance and repair of common property;
  • Owners have the option to attend meetings to discuss and vote on issues including expenses, repairs, improvements and management of the complex;
  • Depending on the type of strata title, any changes or improvements you make to your property may need prior approval by all other owners in the complex;
  • Some strata units may have age restrictions in place, such as 55 years and over for retirement homes.

Unlike in a green-titled property (which has freehold ownership), you may find greater involvement with the other strata owners due to the proximity of the properties and shared interests in the common areas. As such, when considering purchasing a strata-titled property (particularly in an established complex), it is essential to answer a few additional questions before deciding whether it is a good investment. These include:

  • What is the age group/mix of residents?
  • Are the units owner-occupied or rented?
  • What are the costs of the strata fees, levies, rates and insurances?
  • How old is the property, and are any significant repairs required?
  • Are there any shared facilities (such as a gym, swimming pool or lifts)?
  • What are the rules about pets, car parking and the use of the common property?
  • What procedures are in place for maintenance issues?
  • What is the financial position of the strata company?
  • How often are gardening and maintenance carried out, and by whom?
  • Does the strata council employ an external strata company to manage the complex?
  • Are there any fees, insurances or claims pending?
  • How are disputes resolved?

The more units there are, the more complex it may become. Often developments with smaller numbers of companies are managed with relatively few hassles.

In smaller developments with fewer units, you are not as likely to find shared facilities such as pools and gyms. This will reduce the maintenance and upkeep costs, resulting in reduced strata fees for owners.

So with all these extra considerations in place, is a townhouse a good investment? Yes, buying a strata-titled property has several advantages. Firstly, strata-titled developments usually make highly efficient use of the land – especially if they are designed and constructed by experienced builders. 

A reputable builder will carefully consider each dwelling and its relationship to others within the development to achieve the best possible outcome for all owners. The efficient use of the land means the property’s cost relative to the land is much cheaper than buying a house – this is often very attractive to buyers. This is particularly relevant in areas where land price is high, such as inner-city locations and popular suburban areas.

In Summary

There will be an increased demand moving forward for townhouses in well-located areas as younger families look to push into superior locations, and existing homeowners downsize into low maintenance living.

There are opportunities here for investors to take advantage of this trend. There are not enough of these types of properties being built in these locations so that that supply will remain tight.

It is firstly important to understand what is happening and then pinpoint the correct location where these shifts are occurring.

You should be looking in areas where there is already a scarcity factor and look to buy in small boutique complexes.

Start with critical macro factors in each suburb such as jobs growth, public transport and lifestyle factors and then drill down into the macro elements.

Look for a point of difference, a large courtyard, extra off-street parking and ensure you find the correct layout.

By following these steps, you can start to take advantage of these shifts now, and as they continue to develop into the future, it could pay off handsomely. 

Scroll to Top