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What Type of Home Suits Your Family?

Once you’ve decided where you want your new home to be located, it’s time to decide what kind of home you want. The three major choices are: condos, townhouses and detached houses. Each has its benefits and drawbacks, and entails a significantly different lifestyle and set of responsibilities.

House (Single Family Residence)

A house can be the most expensive option in terms of both total purchase price and ongoing maintenance, but it also gives you the most independence and privacy. You won’t have any shared walls, floors or ceilings, and you’ll even have a yard and perhaps a fence to act as a further buffer between you and your neighbors. A yard is also great for children, pets, barbecues, private pools, hot tubs and relaxing in the fresh air. Houses are also generally larger than condos, so you’ll probably have more space.

However, whatever goes wrong with the structure (and things will go wrong from time to time), you’ll have to pay to fix it and you’ll also be responsible for maintaining the yard (or paying someone to maintain it). Houses typically have the best investment value and because a house is all yours, if you outgrow it, you will have the option of adding on, whereas if you have a condo or townhouse, the only way to get a bigger living space is to move. Also, while your monthly mortgage payment might be higher, you won’t be giving a couple hundred dollars to the homeowners’ association every month, so a house’s price might be more comparable to a condo than it appears at first glance – although expenses for a house will undoubtedly be higher. However, there are some houses that belong to homeowners’ associations, so be aware of that when you’re shopping.

Condo

If you don’t like living in an apartment, condo life is probably not for you. You’ll still have shared walls, a shared parking garage and shared common areas. You won’t have complete control over your property, because you’ll be subject to homeowners’ association rules that may control minute details of your life, such as what kind of Christmas lights you can put up or what kind of doormat you can lay out.

If you get along well with others, don’t mind apartment life and don’t mind paying homeowners’ association fees every month for as long as you live in the condo, a condo might be the right choice for you. The main advantages of living in a condo over a house are that you don’t have to worry about maintaining a yard or the exterior structure. In addition, you may feel an increased sense of security if you live alone. Condos also tend to be more affordable than purchasing a house.

Townhouse

A townhouse is sort of a hybrid between a condo and a house. These are often two stories, meaning that you don’t have downstairs or upstairs neighbors and therefore can have a bit more privacy and peace and quiet (especially if you can get an end unit, which will only have one set of neighbors). Townhouses also often have attached garages on the ground level, providing greater convenience and privacy than a condo parking garage, and there may be fewer townhouses in a development than there would be units in a condo building.

Like condos, townhouses have homeowners’ associations (and their attendant monthly fees) and you won’t have to worry about maintaining the building’s exterior. Townhouses are often priced similarly to equally sized condos but if you’re looking for something with absolute entry-level pricing, you may not find it in a townhouse because they’re generally larger than condos, and may even have small yards.

Multifmaily Residence

Multi-family residential (also known as Multi-dwelling unit or MDU) is a classification of housing where multiple separate housing units for residential (i.e. non-commercial) inhabitants are contained within one building or several buildings within one complex. Common forms for this type of property are: 2 units (also known as duplex), 3 units (also known as triplex) and 4 units (also known as four-plex). Some of the highlights of ownership are:

  • Less cost per unit – If you own a single family home (investment) and it’s vacant, it’s 100% vacant. This creates negative cash flow as you are the one responsible for the mortgage payment. If you own a four-plex and one of the units become vacant, now you’re looking at only 25% vacancy factor. The more units you have, the less impact the vacancy factor will have on your cash flow.

  • Better Financing – In today’s new lending world, it is often difficult to obtain financing for properties larger than four units. For sellers, this a little discouraging, but for buyers, it a wonderful opportunity to open negotiations that are mutually beneficial.

  • Less Expense – Usually multi-family units are located in the same place, which makes it easy to keep an eye on small and major maintenance issues. When things needs repair such as electric or plumbing issues, the repair man can work simultaneously in all units, rather than separate visits, reducing cost. You’ll also have more “reserves” with a multi-family property since your rents collected often times are placed as savings for the property, you will have funds in case of emergency repairs.

  • Cash Flow – The cost per unit is a critical component in obtaining positive cash flow. If your cost per unit is less, and your vacancy factor is less. You potentially can obtain better terms, lower interest rates, longer payment periods, and keeping the maintenance of your property to a minimum, you’ll save money. During the first few months of ownership, your rental income should pay for your debts and expenses. You’ll have more positive cash flow to dispose at your leisure.

  • Size

    Regardless of which type of housing you prefer (and can afford), you’ll also have to decide on size. How many bedrooms and bathrooms do you and/or your family need to live comfortably? Is the amount of space you need now the same amount of space you’ll need in the future (e.g., are you planning to have kids, take in an elderly parent or start a home business that will require an office)? Do you want an extra space to rent out to help pay your mortgage? Do you want to use the property as an investment property one day, and if so, what size would be best for that purpose? Can you afford the size of property you want, and if not, can you make do with less or should you keep renting until you can afford something bigger?

    Be aware that the bigger the property, the higher the purchase price, the higher the ongoing maintenance costs, utility bills and insurance, and the more you may need to spend for things like furniture and upgrades when you move in.

    Another consideration is that in some locations, one home size or type predominates. If you need a certain size or type of home, you might actually need to decide on that before you decide on your location rather than the other way around. For example, you may want a two-bedroom, one-bathroom house, but there may not be any houses that small in your chosen neighborhood – your smallest option may be a three-bedroom, two-bathroom house.

    The Great Outdoors

    Finally, consider what kind of outdoor space comes with the property. If it’s a condo or townhouse, does it have any private balconies or decks or a little patch of lawn to call your own? Is there any common green space, a play area for kids, a pool or a hot tub? Do you plan to make use of these things, or will your homeowners’ association fees just be wasted on their upkeep? Are you willing to share these facilities with other people or do you want the private ownership and use of them that may only come with a house? Do you have pets and what kind of indoor and/or outdoor space do you need for them? Will the homeowners’ association allow you to have the pets you want? Do you want to be able to entertain outdoors?

    Once you’ve considered in detail what kind of home best suits your needs, you’re ready to calculate how much home you can afford. The next section will teach you how to do that.