Buying an investment property is one of the biggest decisions you will ever make in your life. There are many things to consider, from the price, floor plan, and location, to the type of home (condo, single-family home, apartment, or multifamily home). Another thing to consider is whether or not you should buy a home in a planned community.
In this article, we shall explore the meaning of a planned community, as well as the pros and cons of investing in one.
Related: Return on Investment and Risk in Real Estate
What Is a Planned Community?
A master-planned community (MPC) is a large, suburban housing development where the houses and amenities are carefully and deliberately designed to make living there as enjoyable and convenient as possible. Residents in an MPC enjoy easy access to many amenities including shopping centers, fitness facilities, public transportation, parks, playgrounds, schools, and even offices. In other words, a planned community is something close to a self-contained mini-city. Most MPCs are located in close proximity to major cities.
On average, planned communities span an area of more than 2,500 acres. According to a Real Estate Consulting report, year-over-year new home sales in MPCs increased by 20% in 2020. Leading the pack among the 50 top-selling Master Planned Communities was Florida’s The Villages, Las Vegas’ Summerlin, and Florida’s Lakewood Ranch.
Case Study: Eastmark
Located in Mesa, Arizona, Eastmark is a best-selling planned community that sits on 3,200 acres. Some of the notable amenities in this community include a local diner, award-winning private schools, and an organic commercial farm. Eastmark plans to add more amenities such as a skate park, an expansive disk golf course, and a catch-and-release fishing pond. In spring, there are concerts in the park, as well as other seasonal activities that bring the community together.
At the moment, there are about 15,000 residential properties available at Eastmark. In addition, many builders have waiting lists. Interested buyers are advised to get pre-qualified for a mortgage early so as to be included in the waiting list.
Benefits of Investing in a Planned Community
Here are some of the reasons why investing in a planned community is a good idea:
- Premium location: For most home buyers and renters, location is the number one consideration when selecting a home. People want to live in close proximity to their jobs, schools, hospitals, shopping centers, and restaurants. Owning property in a planned community means that your tenants can easily access drive and walk to these amenities
- Design options: Planned communities offer a wide range of home styles, price ranges, and home builders. From selecting a floor plan that works for you to choosing fixtures and appliances, you can work with a home builder to create a customized home that is within your budget
- Exceptional community amenities: Most master-planned communities have a wide range of amenities that allow the residents to live an enjoyable, active lifestyle. These amenities include tennis courts, swimming pools, biking/walking trails, picnic areas, dog parks, and splash pads
- High security: Master-planned communities usually provide security measures such as gated entrances, community watch, and 24-hour patrols. This means that your tenants will not have to worry about their safety
- Vibrant social life: One of the great things about planned communities is the built-in social life. Residents don’t have to go far to enjoy recreational facilities. Activities range from dance performances, music festivals, farmer’s markets, and even summer camps for children
- Stable property values: When buying a home as an investor, you are not just looking at the neighborhood, curb appeal, and construction quality. You will also want to know whether the value of the property will remain stable in the future in case you decide to sell. The good news is that well-planned MPCs can keep home prices stable during a recession
- Controlled neighborhoods: In many cases, planned communities are managed by a homeowners’ association (HOA). The HOA is responsible for maintaining common areas such as parks, footpaths, swimming pools, and gyms. In addition, the HOA regulates the developments that can be made on individual residences. This ensures that standards are maintained in the MPC
Disadvantages of Investing in a Planned Community
Planned communities are not for everyone. Here are some of the disadvantages of buying property in a master-planned community:
- Strict rules: Besides the homeowners’ association, some planned communities also have a community development district (CDD) that is responsible for the general upkeep of the neighborhood. Quite often, the HOA and CDD have a long list of rules that determine what residents can and cannot do. This includes limits on things like holiday decoration, paint colors, pets, and landscaping styles
- Additional fees: Homeowners in planned communities are required to pay extra fees for the services provided by the HOA and CDD. These dues are payable annually, quarterly or monthly. The extra fees could range from a few hundred dollars to several thousand dollars a year
- Less privacy: With the close housing proximity, dense population, and communal atmosphere in planned communities, residents do not enjoy much privacy. This can be a turn off for potential tenants who prefer to keep to themselves
How to Find the Right Planned Community
Deciding where to buy the best planned communities for families can be very tricky without the proper know-how. The location of your investment property will determine property prices, rental income, occupancy rate, return on investment, and the kind of tenants you will get. So, what strategy can you use to identify the best planned communities to invest in property?
You could choose to gather and analyze real estate data manually, which can be a very time-consuming and tiring process. The good news is that technology has made it much easier for investors to conduct real estate research. One of the best tools for finding profitable investment locations is Mashvisor’s real estate heatmap. This revolutionary tool will help you find profitable neighborhoods all over the US housing market. To identify the best areas for making money, simply look at the visual cues. The real estate heatmap uses red, orange, yellow, and green colors to represent the performance of different neighborhoods. Red shows areas with low-performance rates, while green shows those with high rates.
You can narrow down your search using the following real estate metrics:
- Listing price
- Traditional rental income
- Airbnb rental income
- Traditional cash on cash return
- Airbnb cash on cash return
- Airbnb occupancy rate
When evaluating an area, you might also want to visit the neighborhood analytics page where you will find the following data:
- Optimal rental strategy
- Number of properties (traditional and Airbnb)
- Walk score
- A rent analysis (historical Airbnb and traditional rental income)
- Real estate comps
- Historical Airbnb occupancy rate
- Optimal property type
- The optimal number of bedrooms
- Optimal platform
Once you’ve identified the best neighborhood for investment, you can find an ideal property on the Mashvisor Property Marketplace. You will find a wide range of off market properties including foreclosures, short sales, bank-owned homes, tenant-occupied rentals and auctioned homes. Using filters like type of property, rental strategy, miles, and budget, you can narrow down listings to match your criteria.
Related: How to Find off Market Properties for Investment in 2021: 5 Ways
Not all master-planned communities are created equal. Therefore, be sure to consider your options before making a decision. Don’t forget to read online reviews to see what current investors and residents of the community are saying.
Start out your 7-day free trial with Mashvisor now.