7 Types of Property Ownership
I get questions all the time about the different types of properties, most often I’m asked about condos versus townhouses. There’s also variation in ownership that can have a big impact on your appreciation rate. So I decided to write an article that outlines it all—both property and ownership types, the pros and cons, and how it can affect the value of your home.
Single Family Homes (SFH)
A single-family home is a free-standing residential building that sits on its own lot. People like single-family homes for the obvious reasons—more privacy, larger yards, less restrictions. It also means you are wholly responsible for the property and any maintenance or costs are on you. The biggest selling point of a single family home is that it appreciates in value more than any other property type.
Duplex: A duplex is sold as one property but has two separate living units (there could also be a triplex or a fourplex). They’re often mixed in with a neighborhood of traditional single family homes. Units can be attached or detached, with yards and decent privacy. Most do not have an HOA.
Duets: You’ll find a lot of these in the East Bay. It’s essentially an attached single family home. Each unit is sold separately and typically has one shared wall. It may feel similar to a townhouse but is generally on a larger piece of land with more privacy. They’re often located in a community of similar developer-built homes with an HOA that will restrict what you’re able to do.
Both duplexes and duets appreciate less than single-family homes but more than any other property type.
Townhouses
Townhouses are a good compromise if you’re looking for a little more privacy than a condo without the price tag of a single-family home—but this will affect your appreciation rate. When choosing a unit, keep in mind that the less shared walls, the greater the value of your home (think corner lot). Most will have an HOA, which means you won’t have control over things like exterior paint color. The HOA may also regulate your ability to rent your home. Older townhouses built in the 60s or 70s are more likely to have a yard. New construction in the SF Bay Area typically has little land, and your outdoor space is limited to a balcony or front patio.
Condos
Condominiums come in many sizes. Some will be two-story buildings, others will look like high-rise apartments. There are some in the SF Bay Area that are as large as 1,000 units. While it will appreciate even less than a townhouse, there are some similarities that restrict value like rent restrictions and shared walls. There will always be an HOA and in San Francisco fees could range anywhere from $600-$2000 per month. Condos are more likely to come with amenities and they can get pretty luxe in San Francisco. Your HOA will dictate a lot of what you can do. For instance, you likely need HOA approval to upgrade to hardwood.
Photo by Expect Best from Pexels
Tenancy in Common (TIC)
This is a type of joint property ownership you’re most likely to see in San Francisco. One common example, Victorian homes with two doors, marked Unit A and Unit B—two people own one piece of property. A TIC is cheaper than an equal-sized condo so they can be a good way into the market but there are ownership restrictions that affect appreciation value. It’s almost like each has its own mini HOA and rules will vary dramatically across agreements. One thing to note, you likely need approval from the other owner when you go to sell.
Co-ops
Co-operative housing is very specific to San Francisco (but even more common in New York). This is a multi-unit building but it differs from a condo because you own shares in the building rather than a specific unit. Your co-op contract will give you the right to occupy a unit but you won’t actually own that exact unit. Everyone owns the building together and shares all aspects like maintenance costs and amenities. These units are cheaper—a same size condo might go for $1-million and be $800k as a co-op. These units do not typically appreciate and it can be harder to secure a lender because it’s deemed a riskier investment.
Below Market Rate (BMR)
This is a type of ownership where you buy a property below fair market rate. For example, a builder might reserve 10% of a new condo building for BMR housing. Your income needs to be below a specific amount to qualify, and each city has different criteria. It’s a lengthy process that can take years. You are essentially put on a waitlist and entered into a lottery when something comes on the market. Since the unit is priced below market rate, you’re not going to see a significant appreciation.
Photo by David Veksler on Unsplash
55+ Communities
These are just how they sound, housing communities where only people over 55 can live. You’ll find these all around the Bay Area and the types of properties and amenities will vary drastically. They range from simple to luxurious, and some even have cooking services or nurses on staff.
Planned Unit Development (PUD)
This comes down to zoning. PUDs are planned communities made up of residences that look like single-family homes, condos or townhouses, and may even include commercial property. A townhouse that is part of a PUD will typically have more value than a townhouse. I recently sold one in Mountain View and it offered so much more privacy than your typical townhouse. It had a backyard with an attached garage, and it felt almost like a single-family home. But because it is part of a PUD, it still had the HOA legal structure we associate with traditional townhouses. Another type of PUD you may see is a condo building where the first floor is reserved for retail like a grocery store.
Cover photo: Bernadette Gatsby on Unsplash