When it comes to buying your first home, the type of home you buy could make a big difference in your return on investment and your lifestyle. Owning a single-family home is on the wishlist of many aspiring homeowners who are eager to free themselves from their neighbors’ walls. However, it can be a lot of responsibility for a busy homeowner. That’s why many first time homebuyers are considering a condo or townhome over a detached, single-family home. Recently, GoBankingRates analyzed the rate of appreciation for each housing type over a 5-year period to determine if one housing type showed better appreciation rates than the other.
Condo vs. House
Most homebuyers aspire to live in a home that’s free of adjoining neighbors and allows for private space outside for pets or children. The freedom associated with the single-family home is what lures many homebuyers to homeownership in the first place. Being the owner of your own home comes with a lot of responsibility, though. And while some aspiring homeowners are eager to take on the added work that a house presents, not all homebuyers are ready to maintain their own property. That’s where a detached townhome or condo could present a better option.
An attached condo typically comes with a Home Owners Association (HOA) that maintains the common areas of the community and often maintains the homeowner’s front yard. An HOA for a condo community will also provide insurance for exterior home repairs. For instance, an HOA for a townhome community might cover the cost of a new roof that was damaged in a hail storm. In a single-family home, the homeowner would be stuck with the cost of repairs. A house owner will also need to maintain their front landscaping.
House hunters should be aware that the difference between a single-family residence HOA and a condo or townhome HOA has nothing to do with fees. The fees will vary based on what each HOA covers and which amenities they offer. Because there’s less maintenance required, a condo or townhome may be more conducive to a leave-and-lock lifestyle for busy or traveling homeowners.
Return on Investment
An additional aspect to consider when deciding between a condo vs. house is the estimated return on investment. Since the two housing types are pretty different, it would be assumed that the rate of return for each would be very different, also. That’s not necessarily true in all areas. A recent analysis from GoBankingRates.com shows the change in value for townhomes vs. houses over a 5-year period. The online personal finance site focused on the 50 biggest U.S. cities to create a list of the best way to invest your savings in each city.
In Austin, the rate of return is not significantly different between a condo and a house. However, the benefits of one may outweigh the other housing type depending on your lifestyle. A busy professional who travels a lot for work may not be the best person to own a single-family home unless paying for landscapers or handymen are an option. A house hunter will need to consider these additional expenses and determine whether or not the HOA fees for a condo would be preferable over the fluctuating cost of maintenance for a house.
Austin:
- Condo value: $306,776.67
- Five-year change in condo value: 28.51%
- Single-family home value: $398,035.33
- Five-year change in single-family home value: 31.23%
Best investment: Single-family home
The difference in five-year growth rates: 2.73 percentage points
Conclusion
As you can see from the GoBankingRates analysis, a detached, single-family home could provide over 2% more return on investment than a condo. The increased rate of change of value for a single-family home may not be enough to convince some homebuyers that single-family house is the best investment. Paying for the additional coverage and peace of mind may be well worth the investment in a condo or townhome for busy homeowners. The deciding factor is what the homebuyer needs based on their current lifestyle. Additional stress and work associated with a single-family house may not be worth the additional 2% return that housing type could offer may not be enough to sacrifice peace-of-mind for a homeowner who is on-the-go or who may be cash-strapped after making a purchase.
To learn more about the risks vs. benefits of owning a condo vs. single-family home, reach out to an Austin real estate strategist. We can help you develop your list of needs for your future home and determine whether a condo or house might be best for you. Then, we will help you develop your successful strategy to purchase your Austin dream home.