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4 things to know before buying a private home

So, you want to buy a single family home?

A good choice. My better half and I just miraculously won a contract in Atlanta’s hot housing market and we couldn’t be happier with our choice.

That said, there are certainly things I was glad to know—and wish I knew—before buying a detached house with no shared walls.

From the context surrounding why they are so expensive to the implications of having a limited/nonexistent HOA, here are four things to know before buying a single family home.

1. They cost a lot more for one surprisingly simple reason.

When considering other factors such as location and year of construction, a single-family home will always cost more per square foot than a townhouse or apartment.

Why is this?

Well, commodity demand certainly plays a big role. Everyone loves having extra space for kids, cars, pets, picnics and general family shenanigans.

Limited supply plays an important supporting role. There are fewer single-family homes and they sell faster than condos or townhouses, Redfin said. In addition, they are built much more slowly than other forms of housing, since townhouses and luxury apartments are more profitable for developers.

But no. 1 reason single family homes are so expensive is because you don’t just buy a house; you buy the land on which it stands.

Developers use a metric called “house value to replacement value ratio” to compare the value of a home to the value of the land below it. In most cities it is positive; on the low end there is Houston at 1.54, but good old San Francisco is almost 3.0.

The fact is that single-family homes are expensive primarily because they include some lush land. By comparison, townhouses only include the part they sit on, while condominiums include nothing.

The “bonus” of extra ground under your feet goes perfectly to my next point:

2. This is a better investment than apartments or townhouses.

Given their demand and exclusivity, finding the right single family home can take some time. But once you do, you’re not just making a big purchase; you have made a big investment.

This is because, in most markets, single-family homes tend to appreciate faster than apartments or townhouses. Many of the reasons are the same as those listed above: high demand, low supply, and rising prices for underground land.

However, another factor affecting their swelling value is flexibility. You can do more things with a single-family home than you can with an apartment or townhouse—things that add value to a property faster or can even generate passive income in your pocket on a monthly basis.

For example, tasteful additions to your home, such as building a terrace or finishing off a basement, can add significantly more value to a home than the cost of an addition.

To illustrate this, I have a fancy open loft upstairs that our realtor says we can wall off for $2,000 to create another bedroom – instantly adding $15,000+ to the home’s value.

If you decide to rent out a room, or even an entire house, you will also earn more rent than apartment owners, since tenants pay a higher premium for single-family homes than for other forms of housing.

Townhouses and condominiums do not grow in price as quickly and do not require such high rents. Sometimes they can’t even get rent due to three letters that some homeowners are afraid of:

HOA.

3. You may not have an HOA (for better or for worse)

HOA – homeowners’ associations. They are essentially mini-governments of your neighborhood, townhouse, or apartment building.

HOAs serve two main purposes:

  • Collect contributions from each household that help pay for the upkeep of common areas, security, and building repairs.
  • To enforce neighborhood-specific rules such as no street parking, no Airbnbs, no giant Nick Cage mural on your garage door, etc.

Townhouses and condominiums almost always have an HOA as there are so many general service areas that everyone has to contribute to.

But in neighborhoods filled with single-family homes, HOAs are less common. Not having an HOA has its pros and cons, and these are worth weighing when buying a single-family home.

On the plus side, not having an HOA means you don’t have to pay dues. In single-family areas, this can save you $500 to $1,500 a year (and the same amount on closing).

Plus, you won’t have an HOA dictating what you can and can’t do with your property—only city ordinances, which are much looser. For example, you can paint your house any color, build a chicken coop, or finish a Nick Cage mural.

But the downside of not having an HOA is that your neighbor can do whatever they want. They can park up and down the street, have noisy tenants, and paint the opposite mural of Hulk Hogan.

Therefore, before making an offer for a single-family home, be sure to ask the listing agent for HOA disclosure, also known as Community Association Disclosure. Read the fees and by-laws and take them into account in your decision.

4. It’s Good to Have a Do-It-Yourself Mindset

Finally, it’s worth keeping in mind that single-family homes, while wacky, require a lot more maintenance across the board than townhouses or condos.

The reason is threefold:

  • You now have real estate to maintain.
  • HOA will not help, as with townhouses or apartments.
  • Unless you’re buying something under 1,500 square feet and/or far out of town, a detached home that you can afford on a townhouse/apartment budget is likely to be a bit older and therefore require more TLC.

If you are buying a single family home, it helps to adopt a do-it-yourself mindset.

I’m not saying you have to reroof and crawl through the HVAC system on the first day. But, ironically, the happiest homeowners I know are those who learn to handle small things on their own (fixing sticky boxes, adjusting water pressure). ) and contact contractors only in case of serious problems (leaky roof, problems with electricity).

This do-it-yourself approach saves these homeowners time and money and increases their sense of pride and ownership of their significant investment.

Trust me, if your family asks you what you want as a housewarming gift, a good cordless drill and tool kit will pay for itself ten times as much.

Summary

If you run the numbers with our housing affordability calculator and a single family home is within reach, I can tell you from experience that it’s worth looking for. Nothing against townhouses and apartments – I have friends who have both and are very happy, and I also looked at them. But a detached house surrounded by your own land feels special.

They may require more maintenance and upfront costs, but a beloved detached home will (literally) pay dividends later.

And for more tips on buying your first home, check out our lists of 9 first-time homebuying mistakes to avoid and 7 best mortgage lenders for first-time homebuyers.

Featured Image: Watchara Ritjan/Shutterstock.com

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