More and more townhouses are being built across the country. The question is, are townhouses a good investment? As a rental investor, how do you know if you should invest in townhouses or opt for a different type of real estate property instead? To help you answer this, we’ll provide you with a comprehensive review of residential townhouses and their pros and cons in the real estate market. On top of that, we will also offer some rental property management tips to help you navigate this business venture.
Key Takeaways
Townhouses are a good real estate investment given their high potential for tenancy and higher property valuation over time.
Location plays a huge role in determining the market value of the property and the potential rental rates.
Investors need to keep their eyes out for hidden costs in townhouse ownership, including HOA fees, insurance, and one-time funding for improvements and repairs.
What Is a Townhouse?
As property managers in Austin, we have noticed an influx of townhouses in recent years. But what are they exactly? A townhouse is a residential property commonly found in urban and suburban areas. Townhomes offer a generous living space, typically two or 3 stories tall, built in rows with one or more walls shared with other townhomes.
A townhouse offers a vertical housing solution with more living space than an apartment or condominium unit. Generally, townhouses are designed to have the kitchen and living area on the lower floor while bedrooms are on the second. Sometimes, townhouses also come with a small yard for outdoor space and even an attached garage.
Pros of Investing in Townhouses in 2025
As an investor, it is important that you know about the benefits of townhouses as a residential rental property. Doing so provides you with key insight into the potential of townhouses to generate revenue. Considering this, let’s take a closer look at the advantages of investing in townhomes:
Location
One of the biggest advantages of townhouses is location. Since these are typically found in urban and suburban areas, the market caters to tenants looking for housing in both communities. On top of that, many townhouse communities offer accessibility by being close to essential services and amenities such as:
Public transportation
Hospitals
Schools
Supermarkets
Shops
This not only attracts more tenants but also influences the rental rate for your property. On top of that, continuous development in the surrounding areas will boost your property’s value over time.
Land Ownership
Another incentive that investors appreciate in townhouses is the fact that you own not just the building but the land beneath it as well. Compared to apartment and condominium units, townhouse land ownership offers more flexibility and autonomy as to how you want to utilize your property. Aside from that, ownership also provides better security when it comes to your property increasing in market value.
Community Amenities
Oftentimes, townhomes have access to community amenities through the homeowner’s association (HOA) they belong to. This typically includes a shared pool, park, or even a gym, which can contribute to overall quality of life.
Lower Maintenance
Investors often spend less on townhomes compared to single-family homes because townhomes are typically smaller in size and come with lower purchase prices. Their compact footprint means reduced maintenance, lower property taxes, and more efficient utility costs, making them a more budget-friendly option for real estate investors looking to scale their portfolios or enter the market with a lower upfront investment.
Cons of Investing in Townhouses in 2025
Now, let’s talk about the potential drawbacks of investing in townhomes. Understanding the disadvantages and possible challenges you might face allows you to address them to the best of your abilities.
Homeowner Associations
While HOAs offer amenities and share maintenance responsibilities for common areas, some aspects of this setup pose challenges to investors. Primarily, HOAs generally have strict rules and regulations that tenants and property owners need to follow. In some cases, modifications to your property would even require HOA approval.
Limited Storage and Space
Townhouses offer a good balance of living space between condominium or apartment units and single-family houses. However, some would say that townhouses still have limited space, especially when it comes to storage.
Noise Issues
Given that townhouses share at least one wall with the neighboring unit, tenants likely hear each other. Excessive noise from neighbors can affect your tenants' quality of life and overall experience. If this is not addressed properly, this can cause frustration for all parties involved and make your tenants feel uncomfortable in their home.
Do Townhomes Appreciate in Value?
Did you know that in early 2024, townhouses accounted for 15% of all single-family home construction? When looking at moving averages that same year, the share of townhomes jumps to more than 17%—the highest percentage we have seen since the mid-80s.
If you’re investing in townhomes, you are probably concerned about whether you’re going to make your investment back if you decide to sell later on. So, do townhomes appreciate in value? The answer is yes. But several factors influence their valuation.
Property Location: In real estate, location is everything. Townhouses in developing areas can receive significantly higher valuations by the time nearby amenities and services are constructed.
Condition: If you’re planning to resell, your property must be in a pristine state. Make sure that everything from the structure to the electrical systems, plumbing, and property upkeep are in good condition to attract quality buyers.
Market Demand: Following the concept of supply and demand, when townhouses are in demand, there’s more leverage raising their value in the market. Competition in real estate can also drive prices even higher, especially in high-demand communities.
Hidden Costs to Watch For
When you’re investing in real estate, there are several more expenses to consider other than the upfront cost. Knowing the hidden costs of investing in townhomes would allow you to manage your finances accordingly.
In townhouse investments, Homeowners Association (HOA) fees typically cost anywhere from $200 to $300 per month. This fee covers access to community amenities, communal property maintenance, and other operational costs.
Another expense townhouse owners must budget for is insurance. In some cases, HOAs may carry a master policy that covers shared walls or structures. However, that isn’t sufficient, and owners need to plan on securing their own policy to cover their individual unit, upgrades, and any personal property. That said, always read the HOA bylaws and your insurance documents carefully to know exactly what's covered.
Another potential hidden cost in townhouse communities is when the HOA decides on a property improvement or there’s a need for a major repair. If that occurs, you may be required to pay a portion of the cost through a special assessment.
Take Your Real Estate Investment to the Next Level
So, are townhouses a good investment? If you’re looking for a good balance between condominium living and single-family housing, townhouses are a great solution. It comes with the accessibility of an urban lifestyle and an expanded living space for better comfort.
Moreover, when it comes to upfront investment costs, townhouses fall in the middle of the real estate spectrum. There is so much potential for townhouses to dominate the real estate market. Investing in one can improve your chances of appealing to tenants or reselling at a higher value.
Whether you decide to sell or to rent your space, working with an experienced property management company can ease your burden. With more than two decades of experience, we at Stone Oak Property Management can help you navigate the real estate market. Connect with us to find out more about how we can tailor our services to your needs.
