Different Types of Residential Properties (Plus their Pros and Cons)
Looking for a new home or investment property? Check out the different types of residential properties and their investment potential here.
Buying a home is a long-term investment. If you plan to live in big metropolitan areas, chances are you’ll see different types of residential properties. With a myriad of building styles currently available in the housing market, it’s important to find the right home that best suits your lifestyle preferences and investment goals.
For those who are new to the housing market, here are the most common types of residential properties you need to know before making your first purchase—whether you’re a novice property investor or a first-time homebuyer.
1. Single-family homes
Single-family homes (SFHs) are houses built on a single lot. There are two types of SFH: attached and detached. Detached homes sit alone with no shared walls. This type of home usually has a driveway and garage space. Attached homes, on the other hand, share a wall or two with neighboring buildings. Some attached homes also have a garage.
Pros: Single-family homes offer more space and privacy compared to other residential properties. These homes usually have front and back yards, which is great for growing families with multiple pets and children. Another benefit of buying an SFH is the flexibility it allows you to design and choose the features of your home. SFHs also have a reliable resell value, which can be profitable to investors who like to buy and flip houses.
Cons: Single-family homes require more maintenance and repair than other types of homes. Unlike condominiums and townhomes, the maintenance and repair costs, such as yard maintenance, plumbing, and roofing, are shouldered by the homeowner alone. For first-time homebuyers, single detached family homes can also be more expensive because of the bigger square footage compared to condominiums and townhouses.
2. Multi-family Homes
A multi-family home is another type of residence that contains two or more housing units. They are usually designed as rowhouses connected by common sidewalls or as buildings with multiple floors. There are several types of multi-family homes ranging from a duplex and four-plex to semi-detached homes, condominiums, and townhouses. Some multi-family homes have their own entrance while others share a common entryway with other housing units.
Pros: For huge multi-generational families, buying a multi-family home allows all members to live in the same building yet in separate housing units. A multi-family home is also a great rental investment as you can live in one unit and rent out the others to earn extra monthly income.
Cons: Unlike SFHs, multi-family homes have smaller square footage and less privacy. In some multi-family homes like condos and townhouses, you will have to pay high homeowners association (HOA) fees. You may also have minimal opportunities to remodel the exterior of your home. If you own a mutli-family home and are planning to lease the other units, you will be responsible for maintaining the upkeep of the entire property, which can be costly.
A condominium development (a.k.a condos) is a type of multi-family property. Condos are single housing units that share a wall or two with other similar units in a multi-story building. These developments can be classified as high-rise, mid-rise, and low-rise buildings depending on how many floors a condominium building has. This housing category also extends to apartments, which contain similar units in one residential building. (Apartments are rented, while condos can be owned.)
Condos typically come with homeowners’ associations (HOAs), which residents pay monthly or yearly to cover the use and maintenance of amenities and facilities. A type of vertical property, condos are prevalent in urban, high-density areas because of the strict zoning regulations.
Pros: Living in a condo is becoming more popular among city dwellers and millennial homebuyers amidst rising home prices. Condos offer lifestyle convenience because of the multiple amenities these developments offer, such as pools, fitness facilities, entertainment, and recreation—-features you don’t usually experience in a traditional single-family home.
Most condos also have 24/7 security personnel and multiple CCTVs installed on the property, adding several layers to your security. Furthermore, living in a condo has minimal responsibilities on the homeowner’s part, since HOA fees cover the maintenance and upkeep of the entire building. Condos are also a great rental investment as young professionals look for convenient and affordable homes in big cities.
Cons: Condos have smaller square footage compared to SFHs, which can be inconvenient for growing families. Moreover, HOAs often limit homeowners from remodeling their units. Some condo buildings also have several restrictions, such as no pets allowed. Since HOAs require uniformity and safety, homeowners must comply with the rules even when replacing doors and windows. The lack of privacy can also be another issue since you share living space with others.
Townhouses (a.k.a townhomes) are multi-floor properties that share walls with adjacent homes on one or both sides but have their own entrance. These properties can operate like a condominium or traditional house. In some townhouses, buyers only own the interior of the home, while the building and the land it sits on are owned and maintained by the HOA. In other developments, residents own both the interior and exterior—including the roof and land—of the unit and are responsible for maintaining their properties.
Pros: Townhomes are less expensive than traditional homes and are a great alternative to SFHs. Like condos, townhomes have HOA fees that already cover the maintenance and upkeep, as well as the security, of the property. For property investors, townhomes can have a high resale value, especially if the development is properly managed and maintained.
Cons: Just like in condos, townhome owners may experience high HOA fees and less privacy. HOA may also restrict homeowners from remodeling the exterior of their homes.
There are different types of residential properties on the market that you can choose from. Whatever you decide to purchase or rent, it’s important to find a home that best suits your lifestyle preferences and home goals. If you’re looking for an investment property, knowing the pros and cons of each type of housing unit can help improve the long-term profitability of your investment portfolio.
To recap, here are the common types of residential properties you can buy or rent:
- Single-family homes
- Multi-family homes
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