The Great Debate: Condos vs. Single Family Residence

Last week we discussed various tools and technologies that can be utilized to make  vacation/short term rental properties more efficient and economical. Today we will talk about something pertinent to both investors and owner occupants: the differences between owning a single family home and a condo/townhouse.

Single family homes and condos both have a heavy presence in the Gallatin Valley. The first difference many people think of is a difference in cost. It’s true condos can be acquired at a lower price point. It’s still possible to get a hold of a Bozeman condo in the low 200’s (but you better move quickly!). However, there are some luxury condos in Bozeman with all the bells and whistles that require a seven figure budget. But generally speaking, condos tend to be smaller and less expensive here in the valley.

Maintenance is an issue that varies quite a bit when comparing single family homes and condos. When you own a house, it’s all on you. It’s true many homes are in HOA’s that may provide some exterior services, but this is typically limited to common areas, roads, parks, trails, etc. The structure you own must be maintained and serviced by the owner. Condos are a little more hands off. Typically condo HOA’s are structured so that the association pays for and maintains all exterior items including roofs, siding, lights, sidewalks, grass, driveways, etc. This is great for those who don’t want to spend their weekends swinging a hammer or firing up the mower. However, it does come at a cost. Condo owners pay monthly HOA dues, which can vary wildly from association to association. Some HOA’s are very well run, have adequate reserve funds, and are prudent and efficient with their services and expenditures. Others are poorly run, have little in reserves, and frequently hit their residents with special assessments for items such as painting, asphalt work, roof repairs, etc. I have owned condos in well run associations and poorly run associations. Generally speaking, I can say a person will typically save money on maintenance in a well-run condo HOA vs. single family home. The opposite is true for poorly run HOA’s.

Another thing that varies a lot when considering a single family home vs. condo is financing. Mortgages are almost always easier to obtain for a single family home compared to a condo. The reason for this is the bank sees condo ownership as a riskier venture due to lower control. Basically a condo owner owns a fraction of a building(s) so this makes it more difficult to ensure things are running smoothly, bills are getting paid, maintenance items are being addressed, etc. Condos in HOA’s that have a high percentage of investor owners (as opposed to owners who live in the units) are even harder to finance. Single family homes are much easier to get a loan on. As long as the borrower qualifies based on income, debt load, credit score, etc. bankers love to write mortgages for houses.

Of course there are other differences between houses and condos such as insurance and taxes. The most important thing with single family homes is to know what to expect for regular maintenance costs. With condos there are many potential pitfalls and nuances. If you’re considering a condo and have never owned one it’s important to team up with a real estate professional who knows what to look for and can guide you through the process. It will take much risk out of the equation and make your transition an enjoyable one.

Last week’s trivia question: As of 4/9/2017, how many active residential real estate listings under $300,000 are on MLS inside Bozeman city limits? a)8  b)20  c)46  d)93  Answer: 20

This week’s trivia question: As of 4/20/2017, what is the highest price of an actively listed home in the Bozeman area? a) $3.4M, b) $7.8M, c) $12.9M, d) $16.5M