Twin Homes Buying

A twin home is basically a duplex with each side owned separately. Or, in other words, two single-family homes connected by a common wall. You’ll find twin homes in PUDs, subdivisions, or in twin home neighborhoods built in or next to single-family home projects. They attract mostly first-time homebuyers and retirees scaling down. Developers build twin projects when land costs are so expensive that a higher density is needed to keep costs down. They may also build a twin home or condo project in order to satisfy federal or local housing regulations that require a certain amount of low-income housing.
The economics of twin homes are more similar to PUDs than to single-family homes. If you buy a unit and find that your neighbor likes to restore cars or doesn’t like to do yard work, you’ve got a problem. A well-maintained twin with great landscaping joined to a neighbor who is a slob will suffer a big loss in value. If the project is a couple of streets of twin homes tacked onto a subdivision without strong CC&Rs (covenants, conditions, and restrictions), there’s not a lot you can do.
Andy and Pat found this out when they bought a twin as their first home near a mid-priced subdivision. They liked the area, but couldn’t afford a single-family house; they could qualify for a twin. The neighbors, also first-time homebuyers, were great, and everything went smoothly for a couple of years.
Then a slowdown in the local economy forced several large businesses to lay off people, and Pat and Andy’s neighbor was one of the unlucky ones let go. A for sale sign followed, but after several months of no action, the bank foreclosed and an investor bought the twin for a rental.
The tenants didn’t take care of the yard, the grass died, and it soon became an eyesore, making it impossible for Andy and Pat to sell their side. Eventually, they too sold their side to the investor for what they owed, losing equity and about a thousand dollars in closing costs. To be fair, this situation could have gone in a different direction. Suppose Pat and Andy had bought a rundown twin at a great price, moved in, and fixed it up. After a year or two, the economy improved, interest rates dropped, and an entry-level housing shortage developed, causing housing values to skyrocket.
Homeowners like Pat and Andy could sell, make a good profit, and move up to a bigger home with a hefty down payment. It’s like playing the stock market. If you can buy low and the market goes up, you make a profit.
Unfortunately, for most people their housing decisions depend on what’s happening in their life at the moment and not on the business cycle. When that happens, making or losing money in real estate becomes a toss of the dice. A little planning and homework can improve your timing considerably, so you can move up with a big down payment. So, if you find a great deal in a twin home project, do the same homework you would do when considering a condo. Especially important, meet your neighbor and make sure you’re compatible before you sign the purchase agreement. If the other side is a rental, an oversize red flag is waving frantically. To put a positive spin on it, perhaps you could eventually buy the other side too and have a duplex. Twin home financing is the same as detached single-home financing, because the homeowner owns both the structure and land.