Many (many, many, many) townhouses were built in Harrisonburg between 2002 and 2007.  They are still being built, but not at the same pace.  The principal reason for this shift in building is that home values increased faster than rental rates.  As such, a smaller and smaller pool of investors are considering purchasing townhomes as income generating properties --- though that may be changing again.  Let's see how things compare when buying an income generating property in 2002 versus today.

In 2002, a new two-story townhome in the City could be purchased for roughly $100,000, and rented for approximately $725/month.  Here's how the annual cash flow looks:

As you can see, this is a barely break even scenario using the conservative calculations above, though more positive cash flow was achieved by most investors by managing the properties by themselves, and because very few repairs were needed.

Fast forward to 2009, and here's how the cash flow might look on a new two-story townhome in the City that can be purchased for roughly $150,000, and rented for approximately $900/month:


As you can see, an investor would now have to bring more than 20% as a down payment to even break even in this townhome scenario.  There are plenty of investors who do bring more than 20%, or who pursue other properties with better cash flow characteristics, but hopefully this is indicative of how the investment property landscape has changed over the past seven years. 

But --- perhaps some of those investors are, or should be, looking at the Harrisonburg market yet again.  You see, there are quite a few townhouse owners who bought back in 2000, 2001, 2002, or 2003 who bought when townhouse prices were very low.  If they haven't refinanced, or taken out a home equity line of credit (HELOC), they likely have a loan payoff significantly below what the market will bear for their townhouse.  Thus --- there are deals to be found with investment properties right now in Harrisonburg.  They won't always jump out at you, as they may be listed at reasonable "market price" --- but if the owner is motivated to sell, and they bought 7-10 years ago, they likely have quite a bit of equity with which they can negotiate.

If you are looking for an income generating property, feel free to call me (540-578-0102) or e-mail me (scott@HarrisonburgHousingToday.com) and I can assist you in determining whether we can meet your investment goals given the opportunities in today's market.

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com