Why Townhouse Development is a Terrific Multi-Family Investment

Investing in property development can be risky. Naturally, investors want to earn maximum profit from their new construction housing development and avoid as much risk as possible. If you are considering investing in a multi-family construction project, you may find yourself weighing the options between building an apartment complex with many units or developing a group of townhouses.

When it comes to townhouse development vs apartment complexes, townhouse development is often the safer route to go.

Read on to find out why townhouse development makes the best multi-family investment.

MAXIMIZING PROFITS

There is a legion of financial risks involved in apartment investing starting with the enormous expense of capital needed to construct the units. Then, you’ll need to consider the expenses created by tenants moving in and out, inevitable periods of vacancy, marketing expenses, management expenses, plus the cost of ongoing maintenance and repairs.

The expenses of maintaining several apartments can take a bite out of profit margins. It is actually more cost-effective to maintain a few townhouses. Townhouses are also usually easier to manage for reasons that we’ll get into next.

STABILITY OF TENANTS

Apartment units interest families but they also attract temporary renters. Townhouses attract families with their family-friendly layouts. Families are more likely to rent on a long-term basis as they will want to stay within their child’s school district and avoid disrupting the child’s school year and routine where possible. Apartments are smaller and offer less privacy and therefore are not attractive to families on a long-term basis.

Apartments have a high turnover rate. Moving one tenant out and another tenant into an apartment reduces profits. A new tenant doesn't just mean changing the locks; you’ll also need to worry about carrying out maintenance and repairs, carrying out eviction proceedings, signing a lease, running background checks, accounting for cleaning fees, and more.

Townhouses are typically valued with higher monthly rent estimates, so they are sure to attract renters with a stable income. They also have more space and privacy so families will prefer to live in them long-term or even indefinitely.

REGULATIONS AND ZONING

If you’re still thinking about investing in an apartment complex, it’s important to consider local zoning laws and regulations. Many cities have limits on what kind of apartment complex you can build and where. These can inflate construction costs. Townhouses may face issues with city board members and city planners but tend to raise fewer flags.

Unfortunately, apartment complexes are often associated with issues like security, crime rate, and liability. Investors find it difficult to convince cities that their low-cost apartment complexes won’t cause trouble down the road. That is why we are seeing an increase in luxury apartment complexes.

MAINTENANCE COSTS

Owning a few townhouses as opposed to several apartment complexes means fewer repairs. Your tenant turnover rate should be lower and you’ll have better tenants that will be more likely to report needed repairs.
A broken pipe in a townhouse is a headache, but a broken water pipe in an apartment complex can damage surrounding apartments and cause even more maintenance and repairs.
The bottom line is that more units mean more risk. And if that risk involves something major, your investment will be down the drain.

CHOOSING THE RIGHT INVESTMENT

Investors, of course, can make money on apartment complexes. It’s important to choose what is best for you. Consider your location. Research what other types of complexes are near your property and see how they are performing. Consider the cost of construction and assess your budget. Take your time making the best decision for your investment.

READY TO BUILD YOUR NEW CONSTRUCTION TOWNHOME DEVELOPMENT?

The professionals at Creative Home Designers are ready to help you bring your townhome development to life. We can customize townhouse designs or even apartment units that meet your unique needs. We help you by creating an efficient floor plan that has great flow and a flawless design.

Call us today for a consultation. We’ll begin by discussing your vision for your townhouse development, then we’ll get to work creating a design and plan just for you. We can even offer a 3D rendering of your home design to help you envision your future development which you can use to pitch to other investors.

Then, due to our extensive Oklahoma network, we can connect you with trusted builders and providers who will see you through to the finish line.