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Condo, House or Townhouse: Which Is Best for You?

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The decision to buy a home can be complicated whether you are a first-time homebuyer or are looking for a second home, especially if you are shopping for property in an urban area. What kind of residence can you afford? Should you buy a house in a suburb or a historic downtown? What about a condo within walking distance of a train station? Or a townhouse in a new urban infill community?

Choosing between a townhouse, condominium or house involves questions of location, maintenance, lifestyle and price. These housing styles also have a lot of overlap, so choosing one over the others may involve less sacrifice than you might expect.

What is a condominium?

A condominium, called a “condo” for short, is actually a kind of ownership, while the terms “townhouse” and “house” (a standalone structure most people would think of as a traditional single-family home) refer to physical structure styles.

As such, condos can come in a variety of shapes in sizes, though they are often similar in size and appearance to an apartment. At the same time, some condos can be quite expansive. Condos typically are private residences that are part of a building or multiple-unit communities, although some detached condominiums are available. They are privately owned and occupied by an individual or a family.

Condos comes in many configurations beyond apartment-style buildings, said Mark Swets, executive director of the Association of Condominium, Townhouse, and Homeowners Associations. “Condos have less restrictions,” he said. “They can be converted from old office buildings or loft space.”

Regardless of their location or size, condo owners all share in the ownership of common areas and facilities that are maintained by a board that is comprised of members elected from the condo community. The board collects dues from the community’s condo owners and uses the money to maintain and operate common areas and amenities such a community pool, gym, and landscaping.

Condos often are found in urban areas where land for construction is scarce.

What is a townhouse?

A townhouse typically is a vertical, single-family structure that has at least two floors and shares at least one ground-to-roof wall with a residence next door.

Townhouses, which are individually owned, can be lined up on a row or arranged in a different configuration. Owners buy both the structure, including its interior and exterior, and the piece of land that the townhome is built on, which may include a small yard.

"A townhome is not a kind of ownership, but refers more to the physical structure,” Swets said, referring to the vertical design. “From an ownership perspective, some townhomes are classified as condos while others aren’t. It all depends upon what’s listed in the declaration and bylaws for each association."

Should I buy a house, townhouse or condo?

Here are some factors to consider when deciding what kind of residence to buy:

Maintenance

Are you good at home repairs, or do you prefer to have a handyman on speed dial? While a single-family house gives you freedom to fix up or renovate as you please, you also are responsible for all repairs and maintenance. The monthly fee you pay to a board or association if you own a condo may take care of maintenance such as mowing, exterior repairs and snow shoveling. Townhouse homeowners association fees may care of maintenance of the community’s common areas, such as a shared backyard or playground, but it’s not guaranteed.

“If I were to look at a condo, it would be because I didn’t want to worry about the maintenance outside,” said Lori Doerfler, the 2018 president of the Arizona Association of Realtors. “If I wanted to have a piece of land but not a lot of yard, a townhome would be a good choice.”

Location and lifestyle

Condos, townhomes and standalone houses can offer a wide range of lifestyles and locations. Homebuyers should think through whether they’re interested in an urban, walkable lifestyle, a suburban neighborhood, or something in between. Where you live also will determine your commute to work and proximity to family and friends.

Restrictions on ownership

While condos can offer convenience and amenities, they also come with monthly dues, occasional assessment fees for special community projects and property rules, which can be strict. Single-family homes, especially those in neighborhoods without a homeowners association, have few or no restrictions.

Buyers should always check the community’s bylaws to understand the rules.

“I always want to get the covenants, conditions and restrictions to the buyer,” Doerfler said. “They describe the requirements and limitations of what you can do with your home as well as the grounds.”

Monthly fees

Any type of dwelling may come with a monthly fee to help pay for upkeep of the community’s amenities. Owners of a standalone single-family house in a neighborhood with a homeowners association will pay monthly or annual HOA fees, and condo and townhouse owners will pay fees every month to the community board or association.

When factoring your monthly mortgage payment, be sure to add in the HOA or condo association fees to determine how much you’ll pay to live in the dwelling. Fees could significantly increase your cost, putting a seemingly affordable dwelling out of reach.

Lending and price

Where you live will determine the price that you’ll pay for your home. Homes in desirable areas, such as downtowns and good school districts, can cost significantly more that homes with a long commute to a city.

Interest rates also vary by state and by lender, so it’s important to research loan terms from several lenders before making a decision.

Condo vs. townhouse

Benefits: Again, condos and townhouses aren’t mutually exclusive, but their potentially different physical attributes and homeownership structures make them worth comparing in some ways. Both offer less maintenance than a house, the opportunity to get to know neighbors and build a strong community, and walkable amenities such as a pool or community gathering space. Condos may offer a variety of amenities, and with new developments providing over-the-top extras such as rooftop bars, doormen and catering kitchens.

Risks: Condo and HOA fees can be expensive, and you are trusting the HOA or condo association to provide satisfactory upkeep to the property. Condo fees tend to be higher than townhouse HOA fees because condo associations typically provide more maintenance and amenities, and condo associations can enact special assessments to pay for one-time facilities expenses.

House vs. condo

Benefits: While condos offer a range of amenities and maintenance for exterior property, owning a single-family home provides owners with freedom from the rules and restrictions of condominium ownership. Buyers looking for privacy, a rural or suburban lifestyle or a larger property also will have more options with a single-family house.

Risks: Owning a single-family home means that the homeowner must pay for damage and upkeep to the interior and exterior property that isn’t covered by insurance. Condo associations are liable for exterior property and, if stated in the bylaws, “common elements” such as the roof and windows.

Townhouse vs. house

Benefits: Single-family house and townhouse owners both own their entire units, giving them freedom to renovate and change them as they see fit within any guidelines for exterior changes set by HOAs.

Risks: Single-family homeowners assume responsibility for the entirety of their property, which townhome owners may not be liable for repairs, upkeep, or incidents that occur outside of their unit and the land it sits on, depending on their homeowner’s association.

Which is best for you?

Your decision in buying a home vs. a condo vs. a townhouse should depend on what you can afford, how much maintenance you want to do, where you want to live and the type of community you want to live in. Young families, for example, may want a yard and a house near a good school, while a single professional may be more interested in a downtown condo that is within walking distance to nightlife and the office.

As you consider what kind of dwelling to buy, be sure to include the costs of condo or HOA fees into your budget to be sure that your new home fits your lifestyle and your budget.

Marty Minchin
Marty Minchin |

Marty Minchin is a writer at MagnifyMoney. You can email Marty here

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The 3 Most Important Things to Lookout For in Your Home Inspection

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Lookout For in Your Home Inspection

When my husband and I were forced to miss the home inspection of the first house we’d ever purchased because of an unforeseen and unavoidable family emergency out of state, a couple fairly important things fell to the wayside or went undetected.

For starters, missing the home inspection meant my husband didn’t actually get to see the home we were buying until we showed up to sign the papers on closing day, at which point it was far too late to back out (oops). Additionally, although the home was listed as having central air, it in fact did not, something our inspector had picked up on and included in his report, but that in all the hubbub we failed to notice ourselves.

Of course our particular circumstances were unavoidable, and at the end of the day, we knew missing the inspection meant potentially letting go of some of the rights we would have had had we been able to show up and actually pay attention. For other homebuyers, however, participating a home inspection — where the sole purpose is to identity and call out any unknown or undisclosed defects with the home — could potentially mean saving thousands.

“I always advise my clients to attend the end of the inspection — since being there the entire time may slow the inspector down or distract him from focusing on his job — so that the inspector can review their findings with them,” says Morgan Franklin, MBA, realtor. “Also, if the client is unfamiliar with home systems, like HVAC and plumbing, they can review the maintenance points with the inspector for clarification.”

Of course it stands to reason that missing out on certain findings of your home inspection (like missing air conditioning, for example) will be a costlier mistake than others (like a chip in the banister), so it’s a good idea to keep in mind some of the higher-cost things you’ll want to verify with your inspector while you have the chance. If you can catch these problems before closing, it’s usually possible to try to negotiate the repair cost or the overall price of the house with the seller. For example, as it turned out, the roof on our new house had some hail damage, but luckily this was caught in our home inspection report, and our relator was able to negotiate with the sellers to have them cover the cost of the repairs.

According to Morgan, here are three of the more expensive things you should pay attention to when it comes to your home inspection, if you don’t want to get stuck with a massive bill after the fact.

1. The Roof

What to look for: When it comes to your roof, particularly if you’re in an area frequented by rough weather like wind and hail, Morgan suggests looking out for aging and/or deteriorating shingles and/or flashing (or the metal corner pieces where the roof has a joint, like for a chimney or roof vent) that isn’t in proper order.

What it could cost you: The average reported cost of replacing an entire roof was approximately $6,794, with most homeowners spending somewhere between $4,663 and $8,951, according to HomeAdvisor.com.

2. HVAC (a.k.a. heating and cooling systems)

What to look for: While your home inspector will test the air temperature of your place, if they find issues with it you can always have an HVAC technician inspect your home, as well, to get further information. Morgan recommends looking at the serial number on your HVAC unit and running a quick Google search to find the manufacturer year — don’t just blindly believe the age on the disclosures (or, in our case, that one even exists!). “Once an HVAC unit reaches 15 years old, it’s likely close to the end of its useful life,” he said.

What it could cost you: If your HVAC is just in need of some simple repairs, most homeowners spent between $165 and $492 to fix them, according to HomeAdvisor.com. However, installing a new air conditioning unit is an entirely different story. Again according to HomeAdvisor.com, most homeowners spent between $3,693 and $7,146 to do so, with the national average being about $5,234.

3. Structural damage

What to look for: Your inspector will be looking for cracks and settling in the foundation of your home, to start. Of course the older your home is, the more likely these issues are to appear. “However, another contributing factor is water,” says Morgan. “For example, if the crawlspace is wet, look out for structural issues.” Any structural items noted by your inspector should thoroughly inspected by a professional — like a structural engineer or contractor — to assess exactly what damage is there and what the repairs will entail and cost.

What it could cost you: Foundation repair issues will vary widely based on what they are and where you live, but costs range from about $3,822 on average, with most homeowners spending between $1,763 and $5,880, according to HomeAdvisor.com.

The truth is that by the time you get to your home inspection, your head might be spinning from everything else you’ve already gone through (you know – finding a realtor, looking at houses, saving for a down payment, putting in an offer, etc.), but this is a super important step in the home buying process, so it’s important to not lose steam now. The good news? Your home inspection will be one of your final steps before closing day, so take heart in that fact, at least!

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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College Students and Recent Grads, Life Events, Pay Down My Debt

Do You Need to Buy a Home by 30?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Purchase agreement for house

About once a month, someone walks up my driveway and rings the doorbell. Sometimes it’s a representative from some sort of home repair company that’s fixing up the house down the street, telling all the neighbors that they might also want to consider updating this or that. Other times it’s a realtor passing out business cards. Occasionally it’s kids from local schools selling stuff for a fundraiser.

No matter who it is, though -- from fellow Gen Yer installing the neighbor’s new windows to some sort of salesperson blatantly ignoring the community’s “no soliciting sign” -- when I open the door I’m usually greeted with the same question:

“Hi there! Is there a parent at home I can speak with?”

I’m 25. I’ve held a college degree and maintained an actual, grown-up career for four years now. I run a business. I’ve opened multiple retirement accounts. I do all sorts of grown-up stuff. And still: are your parents at home?

Annoying, although I get it. I do look young -- especially considering that I also happen to own the door that people knock on.

Jumping into Home Ownership as Soon as Possible

I was 22 and one year out of college when I bought my first house. Yes, I was in a hurry and for good reason: the housing market finally found the bottom but was slowly recovering.

Buying early meant the potential to get in at the bottom – and then selling at the top (or at least, considerably higher than what it cost me to get into the market). In other words, I was looking at making an investment. That’s the biggest reason I bought a home and why I encourage other millennials to think about doing the same before they enter their 30s.

As it turns out, buying my house ended up as a good investment. Three years after closing on that first home I’m about to close on it again, but as the seller this time. It was on the market for about 10 days and sold for $40,000 more than the price I paid.

In my experience, home ownership has been a positive thing. It enabled me to leverage my assets in order to grow wealth.

Buying a house won’t be right for everyone. But I urge you to consider home ownership, in some form or fashion, by age 30. Real estate can be an amazing tool to boost your wealth when you’re young if the right situation presents itself.

Advantages of Home Ownership

One of the biggest current advantages of home ownership: crazy-low interest rates. Our parents paid 10% in interest on their home loans when they bought their first houses back in the 70s and 80s. Today, millennials with good credit scores can secure interest rates as low as 3.5%.

This is a wonderful opportunity if you know you want to stay in a particular area for the next few years. This allows you to leverage your assets – in this case, cash for a down payment – to finance a larger asset for an extremely low fee. (The interest rate on the mortgage is the fee you pay for borrowing the money.)

This allows you to maintain a place to live while freeing up the rest of the cash you earn each month for investments that will more than make up for the cost of the interest on the loan. Here’s what taking out a mortgage to finance a home purchase allowed me to do in my early twenties, with my low income:

  • Provided me with a place to live for less than the cost of renting a home or an apartment in the same area.
  • Allowed me to possess a large asset for a relatively low cost.
  • Freed up cash flow: I could take money left over after living expenses were paid each month and invest it in the market to continue to grow wealth. (The interest rate on my first mortgage was 3.7%. I earned about 18% on the cash I invested in the stock market over the last year.)
  • Gave me an opportunity to continue leveraging assets to grow wealth: I put $16,500 cash down on my first home and I’m walking away from the sale of that house with about $45,000 in cash. That’s what’s left from the sale after paying off the mortgage and paying the realtor’s commissions.

There are other major benefits of homeownership. Homeowners who sell their properties and make a profit get an enormous tax break; if you’ve owned and lived in a house for at least two out of the last five years you receive a capital gains tax exemption. You can also write off mortgage interest on your taxes each year.

Under the right circumstances, buying a home can allow millennials to accelerate the rate at which they build wealth. Of course, there are cons to buying a house too. It’s important that you think about these and understand how they can impact you before starting a home search. Here are some of the most common cons for Gen Y:

  • More debt may be the last thing someone with tens of thousands of dollars worth of student debt wants to take on. A mortgage becomes an added financial obligation that may just be too much.
  • Real estate is costly to buy and sell. Closing costs and realtor commissions alone can be tens of thousands of dollars when all is said and done. Understand what the costs will be before you look into buying a home or securing a mortgage.
  • In normal markets, you need to hold on to your property for 5 to 7 years before seeing a return on your investment. There are exceptions to this, but it’s a good general rule of thumb to keep in mind.
  • You’re the only person responsible for maintaining your home and making repairs.
  • Property taxes can increase, making cost of ownership more expensive than you planned on when you bought.

When It Makes Sense to Buy a Home

I believe buying a home in your 20s can pay off if the conditions are right. It helps to start in a low cost-of-living area, where both real estate prices and annual property taxes are relatively inexpensive when compared to other regions. The South and Midwest may provide 20-somethings with the best financial shot at home ownership.

Before buying, you should check out the local rental market. Selling real estate isn’t always easy, it’s never cheap, and it might be a long process. If the rental market in the area is strong, becoming a landlord is a smart backup plan should you ever want to relocate to a new city, travel full-time, or ease the financial burden of carrying a mortgage. There’s also the option of buying a home with the sole purpose of renting it out to tenants.

And of course, you want to consider the housing market in general. If you’re local to the area, it will be easier for you to spot and correctly identify trends and changes. You may see potential in a nearby neighborhood before real estate prices reflect increasing popularity.

Do your research and due diligence. It makes sense to consider buying a home if you can reasonably assume the value of the home will steadily rise over the next few years. And it only makes sense if you can actually afford the home you want to purchase.

Your housing expenses should not exceed about 30% of your income. Ideally, they should be less. Think long and hard about getting into a house generating monthly expenses that will cost you more than 30% of what you make monthly.

Do You Need to Buy a Home?

Let’s face it: you need someplace to live and call home. Does it need to be a home you own? No, it’s not necessary.

But it is an option that more Gen Yers should consider as they pay down student loan debts and start investing money to build wealth. If you’re interested in homeownership at a young age, approach the situation from a purely financial standpoint and leave your emotions at the door.

Most people can’t afford their dream home in their 20s, and that’s okay. Consider resale value and rental opportunities when you consider buying a home before 30 to make sure it’s a smart choice. If the numbers don’t work out in your favor, keep looking.

The only time you “need” to buy a home by 30 if it fits within your financial game plan. Do your research, ensure your costs are manageable, and have a backup plan.

Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at Kali@magnifymoney.com

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