In
its most simple form, the process of buying a home is little more than
a series of decisions -- a sort of Real Estate "what, where, when and
how." One of the first decisions (and usually one of the easiest) is the
"what" -- as in "what different types of houses are there, and what housing type best meets your needs? Housing types fall into several different categories, most notably, the classification of housing types such as:
Single
family homes, multi
family homes, townhouses,
or condominiums.
Each of these house styles brings its own set of advantages and disadvantages. One housing type may
be much better suited to your budget and lifestyle than another. Depending
on your location, you may find different types of housing in different areas, and more choices of one particular type of
home than others.
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Photo Copyright © 2005 Paul Silver Photography |
Single
Family Homes
By
far the most common classification of housing types in North America is the single family
detached home -- ranging from 600 square foot bungalows to 6000 (or more)
square foot sprawling mansions. The most important distinguishing factors
that determine a single family dwelling are that it sits on its own piece
of land (which is sold part and parcel with the home) and it is not attached
to anyone else's residence. With single family homes, your home pretty
much is your castle. Subject to neighborhood and subdivision regulations
and ordinances, you can do with it as you wish. Want a different exterior
color? Usually you can accomplish that (taking into account the fact that
the neighbors may not be receptive to a purple house with ecru trim).
Need more room and want to add on? Subject to the codes of your jurisdiction,
you may be able to expand your living space.
You will probably have a yard of some sort -- from "postage stamp" size
up through multiple acres, and your ownership will include all of it.
In effect, when you buy a single family home your purchase will be of
a parcel of land (your lot) on which sits a structure (your house).
Is a Single Family Home for You?
- You like your "space." The idea of apartment living gives you the willies.
- The
prospect of cutting the lawn, trimming the bushes and shoveling snow
excite you (or at least don't send you headed for the nearest bridge.)
- You
like the idea of modifying your home -- changing the color, the appearance,
the size. Having someone tell you that you couldn't do that would bother
you.
- If
you like, you are able to build a single family home (building a
townhouse or condominium community gets a little expensive!)
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Advantages |
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Disadvantages |
- To a large degree, "your space" is your own. You can modify or improve it as you wish.
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- All
maintenance and repair costs -- interior, exterior and everything
in between -- are yours.
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- Resale
value is generally the highest on single family detached homes.
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- Lack of amenities (for example, pools, playgrounds, etc.) that you may find in other types of housing.
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- If you need more room, you can usually add on to the existing house.
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- You are responsible for landscaping and lawn upkeep costs.
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- Generally there are no property management fees as there are in condominiums and many townhouses.
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- In most areas, single family homes are more expensive than townhouses or condominiums.
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Advantages |
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Disadvantages |
- Subsidy of payments on your your mortgage .
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- You will be responsible for maintenance of apartments in the house.
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- Ability to afford a larger mortgage loan because of the subsidy.
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- You give up privacy when compared to single family homes as well as townhouses.
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- And because of the above, the ability to purchase more house than might otherwise be possible.
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- You will have to deal with rent collections, evictions, and other responsibilities of being a landlord.
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- When time to sell, you will open the market with investors, which may pay higher prices if rents are good.
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- When it is time to sell, it can often take longer to sell than a single family home or a condominium or townhouse.
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Multi
Family Homes
Although there are several different types of houses in the multi family classification of housing types, the
easiest way to understand the concept of a multi family house is to
think in terms of house styles with a mother in law apartment, or additional
other apartments. This situation allows you to subsidize your mortgage
payments with rent from tenants, or in some cases even to make a
profit. Of course, you will be living with tenants in your own
building. And, as the owner, you may be pestered by them on occasion.
Many people buy two family houses so that their retired elderly parents
can live near them. Thus the so called "Mother in Law Apartment". Other different types of houses that fit this classification of housing type include 3, 4 or even 6 unit houses. In Rhode Island, a three unit multi family house constitutes a residential property. Any more than 3 and your financing will be considered commercial. This is an important consideration when looking for the right property, as it may effect your cash flow and investment return.
Without
doubt, owning a multi family home and living in it makes you a
landlord. You will be responsible for maintenance on not only your own
apartment, but that of the your tenants as well. You will have to
tolerate noise or other traffic in the common areas. And you will have
to deal with issues of rent collecting, eviction, vacancy periods, and
trash removal. As far as vacancy periods are concerned, you should
expect some amount of time in which the apartment(s) will be vacant:
Between tenants when you will need to paint, repair, or otherwise gain
new tenants. These periods can be long or short depending on how
proactive you are as a landlord.
On
the up side, you will have a subsidy for the payments. Many people are
able to afford much more of an investment in real estate by purchasing
a multi family house precisely because of the subsidy to the mortgage
expense provided by tenants.
Is a Multi Family for You?
- You don't mind dealing with both interior and exterior maintenance and repairs, for both your own space and for the rental spaces.
- You
like the idea of being able to afford more house for similar or lower payments.
- You like the safety of numerous and nearby neighbors.
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Condominiums
Again, although there are different types of houses that fall within the classification Condominium, the
easiest way to understand the concept of condominium ownership is to
see at as an apartment you own (in fact, many condominiums are
apartments that have been converted over the years). Your ownership
extends inward
from your interior walls, floors and ceilings. In addition, you are a
partner, with all of the other owners in the complex, of the exterior
structure (the foundation, exterior walls and roof) as well as any
common areas and amenities (for example, swimming pools, clubhouses,
tennis courts, play areas, etc.)
One
of the requirements of condominium ownership is the payment of a
monthly condo fee, which covers general repairs and maintenance to the
common areas of the complex as well as (hopefully) build up a cash
reserve for future needs. In general, all exterior maintenance and
repairs are the responsibility of the condominium association,
although you will be charged for them, either through your association
dues or a special assessment (a one time charge assessed to all owners
for, as an example, a new roof). The normal day-to-day maintenance of
the grounds (some examples are cutting the grass, shoveling snow and
maintaining the pool) are also the responsibility of the association.
Interior maintenance and repairs (for example, replacing a dishwasher)
are the responsibility of the individual owner.
In some areas, a condominium may be the only consideration that fits within
your budget. The reason for this is simple. In general, the same square
footage will cost less in a condo setting than it will in a single family
home or townhouse, due mainly to land cost -- you can build many more
condos than you can single family homes on the same amount of land.
Is a Condominium for You?
- You want absolutely nothing to do with exterior maintenance and repairs.
- You
like the idea of amenities (swimming pools, tennis courts and the like)
but you don't like the idea of having to pay for them on your own.
- You like the safety of numerous and nearby neighbors.
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Advantages |
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Disadvantages |
- You will be responsible for little or no exterior maintenance or repairs.
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- You will be responsible for payment of Condominium Association fees.
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- Many condominium communities offer amenities (pools, play areas, tennis courts, etc.) you may otherwise not be able to afford.
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- You give up more privacy when compared to single family homes as well as townhouses.
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- Condominiums are often located in locations convenient to centers of employment and shopping.
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- You
only own from your interior walls inward. The rest of the structure and
all of the land is owned in common with the other condominium owners.
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- Condominiums are often more reasonably priced than other forms of housing.
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- When it is time to sell, it can often take longer to sell a condominium.
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Advantages |
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Disadvantages |
- May have less exterior maintenance and repairs to be responsible for.
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- You will be responsible for payment of Home Owner's Association fees.
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- Having a neighbor's home attached to yours may bring a higher level of security.
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- You give up privacy when compared to single family homes.
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- There may be amenities in the community (for example, pools, tennis courts, playgrounds and the like).
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- Your options for changing the exterior look of your house will be limited.
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Townhouses
Townhouses
often can make an excellent "middle ground" between a detached single
family home and a full fledged condominium because, to some degree,
they offer attributes of both.
For purposes of
definition, we will describe a townhouse as a home that is attached to
one or more other houses, but which sits directly on a parcel of land
that you also own (if you don't own the land, it is a condominium).
For this discussion, townhouses can ranges from duplexes and triplexes
all the way through huge townhouse communities consisting of hundreds
of similar homes.
There is a good degree of variance
in the way townhouse communities are structured. It may be a simple
agreement (as is often the case of duplexes and triplexes) that each
parcel of land and the home that sits on it is separately owned. In the
case of larger townhouse communities, you will generally have an
additional shared ownership in the common areas of the complex as well
as any amenities such as swimming pools, park areas, etc. This
ownership you will share jointly with all other townhouse owners in the
complex.
In any townhouse purchase that involves an Homeowners' Association,
it is vitally important to get as much information as you can, since
the association can have a considerable impact on your ownership
experience!
Is a Townhouse for You?
- You like the idea of your "space" but not having to deal with most exterior maintenance has even more appeal.
- A small backyard "retreat" or deck is just about all the yard you need.
- The idea of having
neighbors close doesn't really bother you -- you just don't want them
above and below as well as next to you!
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