Buying your own home used to be part of the American dream. Many presidents had the dream to increase the national homeownership rate by leaps and bounds. This included financial institutions accepting almost nothing for down payments and giving mortgages to individuals who had shaky credit. This, in part, can be blamed for the burst of the housing bubble: thousands of defaults on loans occurred. So it should be no surprise that today buying a home is less than important for millennials and multi-family housing is becoming more popular.
What is Multi-Family Housing?
According to a study completed by the Department of Housing and Urban Development, one in five families lived in a multi-family housing option in 2011. 24.6% of the housing options in the United States in 2011 were multi-family housing options. This American Housing Survey is done every two years, and the most recent data (for 2013) was published June, 2015. According to this preliminary data, only 64.2% of individuals live in a detached single-family home.
Multi-family housing does not mean that multiple families are living in one house. Multi-family housing options are buildings or complexes that host multiple families in separate units under one roof. Some examples of multi-family housing include:
There are a few options for ownership when it comes to multi-family homes. Some buildings (like apartments) are owned by one singular entity, who rents out each specific unit. Other buildings have an owner for each unit, like a condo or townhome. That owner can then choose to rent out his or her space or live in it themselves.
Why is multi-family housing popular?
First off, multi-family housing is affordable, with the majority of rent prices being between $350 to $750 a month according to the National Rental Housing Finance Survey of 2014. Rent also usually includes some utilities like water and trash collection (about 70% of apartments include this in the rent, according to the NRHFS).
Second, multi-family housing usually includes amenities that most single-family homes don't include, like fitness centers, workout classes, walking trails, clubhouses, and pools. Many individuals who are looking to live in multi-family homes try to find environmentally friendly spaces. Multi-family communities offer smaller spaces for cheaper prices and better amenities than a traditional single-family home. It's fairly obvious why there is a strong appeal for condos, townhomes, and apartments for many families.
Not only is it less expensive to rent, many multi-family housing options don't include the added burden of upkeep that comes with a single-family home. Houses need constant maintenance and repair. For apartments, the cost of maintenance and repairs is usually included in the rent or in HOA fees.
For those who own their condo or townhome, there are still added maintenance costs, it is just less money than a regular home because of the smaller size of the unit. According to the NRHFS, owners paid a median price of $699 per unit for repairs and maintenance in 2011. This has led some condo and town home owners to question whether or not they need a home warranty.
A warranty protection plan provides repairs and replacements on failed systems and appliances within a home, as long as those systems and appliances failed from normal wear and tear and not from neglect. However, many home warranty companies (we'll be talking specifically about Landmark Home Warranty in this next part of the article) have specific rules for home warranties on multi-family housing options.
Home Warranties on Apartments
Landmark does not provide home warranty coverage on renter's apartments because the renter does not own the apartment. This shouldn't be problematic for renters, however, because most maintenance costs are provided by the management of the complex. Check your rental contract and call your landlord if your systems and appliances have failed due to normal wear and tear.
Home Warranties on Condos
If you own a condo, it may be a good idea to purchase a home warranty on your property. Landmark does provide home warranty protection on condos. Home warranties are a great option for property management companies. However, there is one stipulation: if the condo shares any systems with a neighboring condo, that system is not covered by a contract even if the neighboring condo also has a home warranty.
Say you own a condo and you share your air conditioning system with the neighboring condo. You both have a home warranty, but you clean and replace the filter on your air conditioner while your neighbor doesn't provide any maintenance on the system. When the air conditioner fails and you call in a service request, the contractor will most likely say that the failure has been caused by neglect. In this situation, the homeowner who wasn't maintaining their air conditioner should have to pay to fix the unit. However, this is a tricky situation for a home warranty company to be in, as it's hard to place blame on a homeowner and decide who should pay for repairs and replacements when there are two homeowners who operate the shared system. Thus, the shared system isn't covered by the home warranty contract.
However, a home warranty will cover any non-shared system or appliance when it fails from normal wear and tear. Most plans cost between $300-$600 with a $60-$100 service call fee. According to Landmark's data, homeowners open an average of 1.7 service requests a year.
A Home Warranty on a Town Home
If you own a townhome, it's also a great idea to purchase a home warranty. If you are a property manager who owns multiple townhomes and rents them out, you can also purchase home warranties for your properties.