Written by Fernando de Nunez y Lugones Executive Vice President of ONE Sothebys International Realty
Southeast Florida is experiencing a resurgence of interest for townhomes, especially among empty nesters, newly formed single families, and Northeast buyers. In other metropolitan areas like New York, Boston and San Francisco, townhomes are one of the most prestigious and coveted type of properties for sale in real estate.
Due to the zoning ordinances in South Florida, townhomes are usually located in buffer areas, in between single-family home communities and areas where condominiums with more density are located. This represents an important advantage for the townhomes, since they are far enough from dense and highly trafficked areas, but close enough to allow walkability to retail stores and restaurants.
Some of the most sought after locations for townhomes for sale are Victoria Park (Fort Lauderdale), within walking distance to Las Olas Boulevard; Aventura, with limited walkability but configured in small communities with better common amenities; Bay Harbor Island, within three minutes to the Kane Boulevard commercial area; North Miami Beach, in between the Bal Harbor commercial area and the 71stStreet commercial area; South of Fifth, within walking distance to Collins Ave. and the beach; Fernwood Rd. in Key Biscayne, just across the street from Crandon Park and community center; Coconut Grove, west of the Grand Avenue retail district and Coco Walk; and Coral Gables, where most townhomes are within walking distance to Miracle Mile shopping area and the Biltmore and Granada golf courses.
Giralda Place | 275 Gerald Avenue | Starting Price: $699,000
There are three main types of townhomes:
- Condo Townhomes: located on the ground level of condominium towers spread out all across South Florida. These townhomes have the benefit of easy access to building amenities but are also subject to significant HOA fees.
- Townhome Communities: Most of these townhomes are built in clusters in secondary locations, within a gated community. They have an array of amenities, especially a swimming pool and gym. In certain cases, they even have access to a golf course. The HOA expenses of this type of townhome can be steep due to the larger average size and configuration.
- Townhomes with direct access to the street: These types of townhomes are divided in two classes:
- Fee Simple (No Association): This is a great feature due to the fact that the HOA is very low, and it allows buyers to tap into more attractive lending options, minimizing the down payment required to buy.
- Limited HOA:These types of townhomes are set up in small HOA clusters (usually less than 10 units). The most significant cost component of the HOA is usually insurance; thus, HOA fees are relatively low.
Althea Row | 735 Almeria Avenue |Starting Price: $3,150,000
There are three main demographics interested in this type of product:
- Empty Nesters: They appreciate the space, quality of finishes, great walkability, and the general ease of access. This demographic is looking to lower their maintenance cost, coming from larger homes, where insurance, property taxes, landscaping, pest control, pool maintenance, and repairs are not only expensive but also time consuming. Usually, they are interested in larger townhomes to accommodate existing furniture, and they are interested in engaging in a more social and urban lifestyle. Additionally, they enjoy frequent travel for leisure and to visit their children and grandchildren, generally across the country in other locations. One important element to consider in attracting this demographic is to have an elevator, especially for three-story townhomes due to the older average age. These townhomes are usually very spacious, ranging from 3,250 to 4,000 sq. ft. and offer three-to-four car garages.
- New Families: New families tend to buy smaller townhomes in prestigious school districts. One of the most sought-after elements for this demographic is to have access to a small backyard, preferably with a small barbecue area and pool. Usually these townhomes are only two-stories with three bedrooms; generally, the social area is on the ground floor with the kitchen and living area, while the bedrooms are located on the second floor. The typical size of these units ranges from 2,000 to 2,750 sq. ft. with HOAs lower than $350 per month. That is significantly cheaper than a three-bedroom luxury condominium HOA of $1,875 considering an average of $0.75 cents per sq. ft. and 2,500 sq. ft. This difference in the HOA fee allows families to acquire a much larger space at a lower carrying cost, not only because the HOAs are lower, but also a cheaper price per sq. ft. Newly built condos are trading at $650 per sq. ft. in the urban corridor while townhomes are trading at $400 per sq. ft. In certain areas, due to zoning, townhomes can allow for short-term rental opportunities, creating an interesting investment opportunity for investors.
- Second Home Buyers: Townhomes also represents a great option for second home buyers due to the lower carrying cost vs. condominiums and less hassle of owing a single-family home, especially for an absentee owner. One of the most important feeder markets for townhomes are wealthy Northerners that are acquiring property in South Florida initially as a second home, but with the intent to retire in Florida, due to the tremendous tax advantages, lower cost of living and outdoor lifestyle. Additionally, buyers from cities like New York and Boston associate townhomes with a symbol of status, since there are a dearth of townhomes in their markets in the most sought-after neighborhoods that trade between 3 to 8 times more in terms of price per sq. ft. Some international buyers are also acquiring this type of property, usually because of the larger families that may immigrate full-time to the U.S. to benefit from first class schools, healthcare systems and relatively safer environments.
Biltmore Row | 718 Valencia Avenue | Starting Price: $2,600,000
From a developers point of view, the construction timeline is much shorter than a condominium (one-third of the time) and construction financing is more accessible. Moreover, townhome projects could be developed in phases, allowing the developer to accommodate a variable absorption rate. In general, these types of projects are less risky. In the event that not all units are sold prior to completion, the units could be leased for cash flow and developers can migrate from a bridge/construction loan to a permanent loan, typically with better terms. Lastly, townhomes are easier to sell after completion. In most cases, it is highly recommended to have a fully furnished model home and fully operational amenities (if available) since townhomes appeal more to end users.
Townhome offerings are increasing in both quantity and quality due to all of thebenefits mentioned above. Townhomes compete favorably in terms of price, HOA fees, deposit, and construction timing. Deposits are generally 10-20% for townhomes compared to as much as 50% for condominiums and the construction time is usually one-third. Finally, townhomes offer a very private setting and hassle-free lifestyle in comparison to single-family homes, that allows owners or tenants to pack their bags on the fly and tackle a new adventure!
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