So you’re looking to buy a single-family home?
Good choice. My better half and I just miraculously won a contract for one in the scalding Atlanta housing market and we couldn’t be happier with our selection.
That said, there are certainly things I’m glad I knew — and that I wish I’d known — before buying a standalone house with no shared walls.
From the context surrounding why they’re 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’re priced way higher for one surprisingly straightforward reason
Controlling for other factors like location and build year, a single-family home will always cost more per square foot than a townhome or a condo.
Why is that?
Well, raw demand certainly plays a big role. Everyone likes having extra space for the kiddos, cars, pets, cookouts, and general family shenanigans.
Limited supply plays a significant supporting role. According to Redfin, single-family homes are fewer in number and sell faster than condos or townhomes. Plus, they’re being built at a much slower rate than other forms of housing, since townhomes and luxury apartments are more profitable for developers.
But the no. 1 reason why single-family homes are so pricey is that you’re not just buying the house; you’re buying the land it sits on.
Developers use a metric called the “home value to replacement cost ratio” to compare the house’s value to the value of the land underneath. In most cities, it’s positive; on the low end, there’s Houston with a ratio of 1.54 — but in good ol’ San Fran, it’s nearly 3.0.
The point is, single-family homes are expensive primarily because they include some juicy land. By comparison, townhomes only include the bit they sit on, and condos don’t include any.
The “bonus” of extra land beneath your feet segues nicely to my next point:
2. They’re a better overall investment than condos or townhomes
Given their demand and exclusivity, finding the right single-family home can take a while. But once you do, you haven’t just made a big purchase; you’ve made a big investment.
That’s because, in most markets, single-family homes tend to appreciate faster than condos or townhomes. Many of the reasons are the same as the ones listed above: high demand, low supply, and the appreciation of the land underneath.
However, another contributing factor to their swelling value is flexibility. You can do more stuff with a single-family home than you can with a condo or a townhome — things that increase the property’s value faster or can even put passive income in your pocket each month.
For example, making tasteful additions to your house, such as building a deck or finishing the basement, can add significantly more value to the home than the cost of the addition.
To illustrate, I have this funky open loft area upstairs that our realtor says we can wall off for $2,000 to create another bedroom — instantly increasing the house’s value by $15,000+.
If you choose to rent a room out — or even the entire house — you’ll also earn more rent money than apartment landlords since renters pay a higher premium for single-family homes than other forms of housing.
Townhomes and condos don’t appreciate as quickly, nor do they command as much rent. Sometimes they can’t even generate any rent because of three letters that some homeowners dread:
The HOA.
3. You may not have an HOA (for better or worse)
HOAs are homeowners associations. They’re essentially the mini-governments of your neighborhood, townhome community, or condo building.
HOAs serve two primary purposes:
- To collect dues from every household, which help pay for common area maintenance, security, and building repairs.
- To enforce neighborhood-specific rules, like no parking in the street, no Airbnbs, no painting a giant mural of Nic Cage on your garage door, etc.
Townhomes and condos pretty much always have an HOA since there are so many shared areas of maintenance that everyone needs to contribute to.
But in neighborhoods full of single-family homes, HOAs are less common. Not having an HOA has its pros and cons, and it’s worth weighing them when shopping for a single-family home.
On the plus side, not having an HOA means you don’t have to pay dues. In single-family neighborhoods, that can save you $500 to $1,500 a year (and that much in closing costs).
Also, you won’t have an HOA dictating what you can and can’t do to your property — just city ordinances, which are much looser. For example, you can paint your house whatever color you want, build a chicken coop, or finish your Nic Cage mural.
But the downside of not having an HOA is that your neighbor can do whatever they want. They can park all up and down the street, have noisy renters, and paint an opposing mural of Hulk Hogan.
So before making an offer on a single-family home, be sure to ask the listing agent for the HOA disclosure, aka the Community Association Disclosure. Read through the dues and bylaws and factor them into your decision.
4. It helps to have a DIY mindset going in
Finally, it’s worth keeping in mind that single-family homes, while dope, do require much more maintenance across the board than townhomes or condos.
The reason is threefold:
- You now have a property to maintain.
- The HOA won’t help as it will with townhomes or condos.
- Unless you’re buying something under 1,500 square feet and/or well outside the city limits, the standalone house you can afford on a townhome/condo budget will likely be a bit older and thus require more TLC.
If you’re shopping for a single-family home, it helps to adopt a DIY mindset going in.
I’m not saying you need to reshingle your roof and crawl through your HVAC on Day 1. But anecdotally speaking, the happiest homeowners I know are the ones who learn to handle the small stuff by themselves (fixing sticky drawers, adjusting the water pressure) and only call upon contractors for the big stuff (leaky roof, electrical issues).
This ‘get-it-done’ attitude saves these homeowners time and money and increases their sense of pride and ownership in their significant investment.
Trust me, if your family asks you what you’d like for a housewarming gift, a good cordless drill, and a toolkit will pay for themselves ten times over.
Summary
If you crunch the numbers with our home affordability calculator and a single-family home looks within reach, I can tell you from experience that it’s worth hunting one down. Nothing against townhomes and condos — I know friends who own both and are very happy, and I looked at them, too. But a standalone home surrounded by your own land feels special.
They may require more maintenance and upfront costs, but a well-loved standalone home will (literally) pay dividends later.
And for more tips on buying your first home, check out our lists of the 9 first-time home buying mistakes you should avoid and the 7 best mortgage lenders for first-time homebuyers.
Featured image: Watchara Ritjan/Shutterstock.com
