Author Topic: House vs. Townhouse  (Read 7724 times)

dragoncar

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House vs. Townhouse
« on: July 10, 2014, 09:20:00 AM »
We're looking at houses and townhouses, and I'm trying to figure out what is more Mustachian.  I know many of you (and me too) don't like restrictive covenants in general, but lets put that aside for now.  I want to look at exterior maintenance.

Lets assume the house and townhouse are the same size and similar style -- the difference is that one wall is shared with the neighbor.  Will the townhouse have lower maintenance expenses?  Although the townhouse will be less expensive to purchase, I don't think that lower purchase price implies lower maintenance.

I could see this going either way:

Townhouse pros: 
A decently big association will have existing relationships with contractors for repairs.  They may have a guy on staff that goes around fixing things, and since the same kind of stuff will come up again and again in different units, there could be additional efficiency.  They could negotiate a bulk deal when, say re-roofing 50 units at a time.  Shared wall could decrease some expense, as that's one less exterior wall to maintain.  I can go out of country indefinitely and let the HOA maintain the property.

Townhouse cons:
You can't do the work yourself.  The association may not negotiate as hard as a Mustachian might, and may just take the lowest of 3 bids and be done with it.  The association may be more conservative about their repair schedule (or more lax).  If there is mismanagement, things can cost more, and your neighbors may not be able to cough up the money for a special assessment if HOA dues are artifically low.  HOA dues are forced repair savings into low-return reserve funds.

In general, I know you pay for maintenance either way.  I guess I'm trying to determine if there's any net maintenance advantage or disadvantage to getting a townhouse.

If you also want to comment on other aspects of condo ownership vs. unassociated ownership, go right ahead, but I'm mostly wondering about the maintenance.  Similar questions apply to apartment-style condos (with units above or below), but more magnified.

waltworks

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Re: House vs. Townhouse
« Reply #1 on: July 10, 2014, 10:24:55 AM »
My own experience has been that condo maintenance is cheaper - partially because you can get bulk discounts (ie 20 units worth of roof at once) and partially because you can have standing relationships with contractors who will give you a break on price for the steady work they expect to get. The caveat is that I was president of the HOA and could micromanage contractors and bids as much as I wanted (because nobody else wanted the job, basically) and pretty much personally determine when things needed to be replaced. So I sort of had the best of both worlds. If you have a board with expensive tastes or that isn't great with money - HOA could end up being WAY more. It just depends on the situation. If you find the perfect setup (ie you have some significant input at the HOA but the complex is also reasonably big and can take advantage of that) I'd bet on a townhome having lower maintenance costs. Those are big if's, though.

-W

DoubleDown

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Re: House vs. Townhouse
« Reply #2 on: July 10, 2014, 12:40:04 PM »
My biggest downer in regards to townhouses is rising HOA fees + periodic assessments for major repairs/improvements, lawsuits, or other large expenses. You have very little say in those fees and assessments, and they can just go up and up, eventually becoming (or already being) a large added expense on top of the mortgage and other expenses. And the nicer the place, the higher the fees. It's a double-edged sword, too, because once they become so onerous you can't stand it any longer, now you have to try to pass those expenses onto a new buyer.

Another thing to watch out for is occupant vs. renter ratios, and whether they meet your own goals (as an occupant, you might want to keep tenants to a minimum to raise the standards, but if you one day want to rent your place you might not be able to).

I don't think HOA fees and restrictions make townhouses a completely losing proposition, but it's a huge consideration, and far beyond any marginal savings in maintenance you might enjoy. Having one shared wall will amount to $0 saved IMO.

TheHouseStache

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Re: House vs. Townhouse
« Reply #3 on: July 10, 2014, 03:27:42 PM »
In addition to this, you need to also watch out for minimum rental agreements. Many of the associations that I deal with have requirements on the length of leases, with some requiring a year minimum. 
Along the same vein, if you travel a lot, you need to be aware of any vacancy restrictions. 

In the long run, condos can be a cheap(er) option, but you need to run all the numbers and plan for all scenarios such as not being able to rent out a property.  I may also suggest keeping a watchful eye on the association's finances as well.  Some associations get run into the ground or are poorly managed, making leasing or resale a pain in the ass if not impossible. 


One final tip:  Be sure to get a copy of the master insurance binder and review it thoroughly as there may be a discrepancy between what is covered under that policy and what is covered under your home owner's policy. 

dragoncar

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Re: House vs. Townhouse
« Reply #4 on: July 10, 2014, 03:46:55 PM »
Thanks, sounds like a toss up on the maint front.  I was just thinking "do I budget 1% of purchase price, budget only the HOA dues (often far less than 1% of purchase price), or ??"

I'd be living in this place, but future rentals are always a consideration.

JayKay

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Re: House vs. Townhouse
« Reply #5 on: July 10, 2014, 04:01:22 PM »
Just my $0.02

Strictly from a flexibility standpoint, it's a negative to have an HOA.  I'd vote for just getting a regular house.

Depending on how heavy-handed the HOA is and what they're responsible for, you'll be dealing with a regular increase in fees, rental restrictions, special assessments, etc.  Even selling could be an issue if the % of owner-occupied is too low.  (All of this has been mentioned)

Maintenance-wise, keep in mind you'll still need to do your own fixups inside the unit, the HOA won't do any of that for you.  But for larger or riskier fixes (bigger plumbing and electrical changes) you may need permission to do it.  Really, though, maintenance shouldn't be your deciding factor.


BlueHouse

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Re: House vs. Townhouse
« Reply #6 on: July 10, 2014, 04:09:16 PM »
I live in a Townhouse now and I am surrounded on 2 sides by other homes.  my heating expenses last winter (very cold extended winter) were about 1/2 the price of my neighbors on an end unit (only 1 side connected to another home). 

I also own a condo on the second floor of a 4 story building.  I NEVER turned the heat on and usually had a window cracked or even wide open during the winter because the heat from below and next door was more than enough to heat up my unit.  unfortunately, cooling did not have the same effect and my unit was stifling in the summer unless I turned the AC WAY down.

I am unaware of anywhere that you can buy anymore without being in an HOA (house, townhouse, or condo) unless you go live out in the sticks.  Everywhere around me seems to have an HOA.  With so many people hating them, why haven't we been successful in voting them out of existence yet? 

dragoncar

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Re: House vs. Townhouse
« Reply #7 on: July 10, 2014, 06:04:53 PM »
I live in a Townhouse now and I am surrounded on 2 sides by other homes.  my heating expenses last winter (very cold extended winter) were about 1/2 the price of my neighbors on an end unit (only 1 side connected to another home). 

I also own a condo on the second floor of a 4 story building.  I NEVER turned the heat on and usually had a window cracked or even wide open during the winter because the heat from below and next door was more than enough to heat up my unit.  unfortunately, cooling did not have the same effect and my unit was stifling in the summer unless I turned the AC WAY down.

I am unaware of anywhere that you can buy anymore without being in an HOA (house, townhouse, or condo) unless you go live out in the sticks.  Everywhere around me seems to have an HOA.  With so many people hating them, why haven't we been successful in voting them out of existence yet?

HOAs are a totally free market concept.  Most houses where I am do NOT have an HOA, but we still have local regulations.  You are never free to just do whatever you want with your house.

Anyways, I would be getting a townhouse for the reduced price.  Comments about increasing HOA dues are... kinda silly IMO.  Either way you have to set aside money for repairs.  Increasing HOA dues either mean repair costs are going up or they were too low to begin with.  Look at any reserve study and you will inevitably find it way less than 100% funded.  That's because homeowners vote to keep their dues low, which is why they get special assessments.  I see room for some waste in HOAs and some room for efficiency (as discussed above).  But it's not like the money is literally evaporating into thin air -- it goes into operating and reserve funds that you own a share of.  It's really like transferring money from savings into a checking account that you use to pay your roofer later on.

johnintaiwan

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Re: House vs. Townhouse
« Reply #8 on: July 10, 2014, 07:58:18 PM »
I am interested in this as well. I am thinking of purchasing a rental in a college area and am curious about house vs townhouse vs apartment. My only worry is a bad HOA that runs up prices or something. I like that the townhouses and apartments have pools and outdoor bbq areas (it is in arizona). Since I wont live in the area it is also nice that they take care of the outside maintenance.

Are there any advantages of house other than not having a HOA?

dragoncar

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Re: House vs. Townhouse
« Reply #9 on: July 10, 2014, 08:23:20 PM »
I am interested in this as well. I am thinking of purchasing a rental in a college area and am curious about house vs townhouse vs apartment. My only worry is a bad HOA that runs up prices or something. I like that the townhouses and apartments have pools and outdoor bbq areas (it is in arizona). Since I wont live in the area it is also nice that they take care of the outside maintenance.

Are there any advantages of house other than not having a HOA?

Agree shared amenities are nice.  I tend to think I'll be more profitable to rent a condo than a house but maybe my thinking is skewed by my ridiculous local market.

DoubleDown

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Re: House vs. Townhouse
« Reply #10 on: July 10, 2014, 09:07:52 PM »
Comments about increasing HOA dues are... kinda silly IMO.  Either way you have to set aside money for repairs.  Increasing HOA dues either mean repair costs are going up or they were too low to begin with. 

The issue, though, is that the fees are not just limited to repairs in many cases. It sounds like you're operating under the assumption that the fees are just for repairs that you would pay if you were on your own; or, you'll get a discounted rate for mass HOA repairs.

Obviously it will all depend on the HOA in question, but the problem is those fees can also include payments for lawn and grounds maintenance, tree and shrub trimming, snow removal, recreation facilities, swimming pools, security, legal representation, concierges, delivery service, and on and on. They may decide to pay for things that you wouldn't on your own, that have nothing to do with repairs.

Regarding repairs, I've had many friends and colleague bitch about their "Nazi" HOA's, how HOA people walk around with clipboards just looking for alleged problems. They write you up, and you're on the hook to correct the situation whether or not you agree it actually needs correcting. And they'll mandate that you buy Expensive Brand Paint Desert Sage #4 to touch up that area on your trim that's not up to snuff.

Obviously I'm engaging in a bit of hyperbole, but just be aware you're putting your faith (and $) in the HOA management to decide how to spend your fees, and they will raise them over time, guaranteed. My mom pays about $400/month for her HOA on a detached house in a low cost of living town; that covers only lawn, grounds, and pool maintenance. It's highway robbery!

BlueHouse

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Re: House vs. Townhouse
« Reply #11 on: July 10, 2014, 09:22:18 PM »
My townhouse has HOA fees of $92/month and it includes landscaping maintenance and snow removal and maintenance/security for a common children's playground.  We don't have a pool or any amenities.    I have no problem paying $92/month for those services and I feel its a great deal.
My condo is $321/month fee and I've never taken advantage of all the "free" amenities.  If I did, I might thing it's worth it, but I really don't like that I have no control over it and it has increased every year.  I find that the people who choose to get on the board are those who are interested in raising the short-term value of the homes so that they can sell and get out.  That means that they keep raising rates for some "special project" like a fancy new media room or all new furniture for one of the "hangout rooms" or all new gym equipment or all new replacement chaise lounges for the pool.  These things look great for one or two years and help sell units quickly.  But if you plan on holding your condo for many years, you never get the benefit back out of all those improvements.  That's my take on it.
I will never buy anything with a high condo fee again.  Too many jerks on HOA just looking out for themselves.

msilenus

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Re: House vs. Townhouse
« Reply #12 on: July 10, 2014, 09:48:38 PM »
All great replies so far.  One thing I haven't seen mentioned is that townhomes are multifamily dwellings, which at least in my state (California) brings them under a different set of laws and building codes than SFHs.

Fire concerns are the biggest source of extra expenses .  We have sprinklers, which need to be inspected every few years.  Inspection means entry to every unit and visual verification of each sprinkler head for every unit in the complex.  We have fire alarms, which sometimes require maintenance, and always need professional monitoring.  How do you monitor them?  DSL lines --so we get to have broadband contracts just for the fire alarms.  The monitors also need to keep records of their testing to furnish to the city fire department and/or insurance investigators, and pass that cost along to us, of course.  Adds up to something like $20-$25/mo for us in non-inspection years.  Don't have an inspection bill handy.

You're also not going to have DIY options for a lot of things.  Don't want to pay a landscaper?  I guess that's fine if you want to do the whole complex yourself.  OTOH, a lot of that is offset by economies of scale.  I think I only pay about $15/mo for landscaping, and I'm quite happy to pay that.  You can take away my badass-card, if you want.

I think utilities will be a big deal, esp for non-end units.  Just keeping the square footage down is a huge deal as well.

dragoncar

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Re: House vs. Townhouse
« Reply #13 on: July 11, 2014, 10:52:41 AM »
All great replies so far.  One thing I haven't seen mentioned is that townhomes are multifamily dwellings, which at least in my state (California) brings them under a different set of laws and building codes than SFHs.

Fire concerns are the biggest source of extra expenses .  We have sprinklers, which need to be inspected every few years.  Inspection means entry to every unit and visual verification of each sprinkler head for every unit in the complex.  We have fire alarms, which sometimes require maintenance, and always need professional monitoring.  How do you monitor them?  DSL lines --so we get to have broadband contracts just for the fire alarms.  The monitors also need to keep records of their testing to furnish to the city fire department and/or insurance investigators, and pass that cost along to us, of course.  Adds up to something like $20-$25/mo for us in non-inspection years.  Don't have an inspection bill handy.

You're also not going to have DIY options for a lot of things.  Don't want to pay a landscaper?  I guess that's fine if you want to do the whole complex yourself.  OTOH, a lot of that is offset by economies of scale.  I think I only pay about $15/mo for landscaping, and I'm quite happy to pay that.  You can take away my badass-card, if you want.

I think utilities will be a big deal, esp for non-end units. Just keeping the square footage down is a huge deal as well.

Good comments, I know what you mean about fire codes.  Maybe that will reduce your insurance costs though?  Or increase life expectancy?  However, I think we need to assume same square footage for an apples to apples comparison.

SDREMNGR

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Re: House vs. Townhouse
« Reply #14 on: July 11, 2014, 08:03:34 PM »
HOAs are great if it's well run and they leave you alone.  Some of my condos are in these types.  Some HOAs are nightmares and they tell you what to do or not do all the time, or they are not responsive to your requests and they charge too much for the little you get.  All in all, for private residence, I'm for house vs. townhome.  Better privacy. 

However, a bad neighbor is perhaps worse in a house.  No one will help you out if you have a neighbor with loud dogs.  At least an HOA can curb these things with fines, but in a house, you are sort of stuck.  Good luck trying to get code enforcement to help you with a loud barking dog. 

dragoncar

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Re: House vs. Townhouse
« Reply #15 on: July 22, 2014, 10:09:13 PM »
Thanks all, I ended up getting a house.  Some further details over here: http://forum.mrmoneymustache.com/real-estate-and-landlording/mortgage-rate-rollcall/msg351140/#msg351140

We're early in contingencies, and it's a bit more than my Mustachian side would like to pay (we're talking San Francisco Bay Area here).  But it's also well within the affordability limits on one income, and fits into a slightly extended ER plan for me and my wife (i.e. a few more years working vs. retiring NOW in a cheaper location).  Just hope it doesn't fall down the damn hill.

Edit: as a bonus, it's in an unincorporated part of the county.  So it's like negative HOA, where I don't have any bullshit city ordinances against walking the streets with an ice cream cone in my back pocket, and slightly lower taxes. 
« Last Edit: July 22, 2014, 10:27:41 PM by dragoncar »

DoubleDown

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Re: House vs. Townhouse
« Reply #16 on: July 23, 2014, 10:16:53 AM »
Congratulations! Glad to hear you were able to find something, I know you've been looking for quite a while. Besides being a place to live, hopefully this house will end up adding significantly to your net worth in the not-too-distant future and give you lots of FIRE options.

Beware your ice cream in the pocket plan: Despite lack of HOA enforcement, you will likely violate California Penal Code 149.27(a) as well as several local ordinances.

dragoncar

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Re: House vs. Townhouse
« Reply #17 on: July 23, 2014, 10:46:50 AM »
Congratulations! Glad to hear you were able to find something, I know you've been looking for quite a while. Besides being a place to live, hopefully this house will end up adding significantly to your net worth in the not-too-distant future and give you lots of FIRE options.

Beware your ice cream in the pocket plan: Despite lack of HOA enforcement, you will likely violate California Penal Code 149.27(a) as well as several local ordinances.




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