Buying a property is a great opportunity to invest in your future. Many options are on the market for potential buyers, including condominiums (condos) and townhouses. Condos and townhouses can offer an escape from the rental space without the full commitment of a single-family home.
Although condos and townhouses often get grouped together, they have significant differences that should impact your purchasing decision.
At a Glance: Comparing Condos and Townhouses
Condo owners and townhouse owners have vastly different experiences. Let’s take a brief glimpse at the main differences in ownership, size, regular fees, and maintenance:
- Ownership: With a condo, you own the interior unit and potentially a parking space, whereas townhouse owners have the whole unit plus an outside space.
- Size: Townhouses are often larger and may share one wall with a neighbor, whereas many condos are a single unit within a complex.
- Fees: Homeownership association fees are typically more expensive with condos due to more shared amenities and services.
- Maintenance: If you own a townhouse, you typically are responsible for more maintenance, while the HOA handles minor elements of the property
What Defines a Condo?
If you buy a condo, you will own the internal unit, but not the land it sits on. Some condo owners will also purchase a garage space or parking space as part of their investment. Condos are typically located in apartment-style buildings, which often means the condo is a single story. However, condos can also resemble townhomes with multiple levels and only one or two shared walls.
In condominiums, there are more shared amenities and HOA responsibilities. The homeowners association will have higher fees, but they will perform more services, such as external property care. Some condo amenities may include pools, fitness centers, or other services that come with an HOA membership.
Since condos are typically owned instead of rented, you can purchase a condo through financing, such as FHA loans or conventional loans.
What Makes a Townhouse Different?
A townhome can also be purchased rather than rented. It is typically a multi-floor home with one or two shared walls with adjacent properties. However, if you own a townhome, you also own the land that it sits on. This means you have more privacy and freedom to use the yard how you wish.
A townhouse combines the features of a detached home with some of the benefits of shared structures. You will likely still pay monthly HOA fees for some minor services, but these costs are much lower than condo HOA fees. Additionally, the HOA rules will be more flexible, giving you the ability to make more improvements to the property. You will be responsible for the care of the townhouse, but the HOA may handle some services like garbage or snow removal.
Who Handles Ownership and Upkeep?
Ownership and upkeep are two primary differentiators in the condo vs townhouse debate. Condo ownership usually includes just the internal unit. In some cases, a parking space or small garage may also be included in the condo. Outside of the unit, the HOA or complex owner manages all other aspects of the property, such as exterior maintenance and common spaces.
With townhouse ownership, you are in control of more property. You own the townhome itself and the land it sits on, which means you may have a private yard and driveway. You must take care of the internal and external elements of the property. Although the HOA may offer minimal services, the main responsibilities fall on the townhouse owner.
HOA Costs and Community Guidelines
A homeowners association is designed to provide amenities and services for residents in a specific community. In a condo, the HOA would likely be responsible for the entire complex. Condo HOA fees often fall between $300 and $700 per month, with potentially higher payments for high-end locations. These fees depend on the range of services offered, such as maintenance, amenities, and exterior care. In exchange, condo owners must abide by HOA rules, which can include pet policies, upgrade restrictions, and membership requirements.
The typical HOA fees for a townhome are between $200 and $500. They are cheaper because associations provide fewer services for townhome owners. There are also fewer rules, though there may be some restrictions on external projects that affect the atmosphere of the development. Since condos tend to cost more for HOA membership, it is essential to look at the fees and rules when assessing condo vs townhouse ownership.
Pricing and Loan Eligibility
The purchase price of a condo or townhouse will vary depending on the size of the living space, the location, and the HOA services. Since condo buildings only sell individual units with no land, a condominium is going to be cheaper than the average townhouse. However, the trade-off is higher HOA expenses.
A townhome will be more expensive because you are getting a multi-floor property and land. Condo living offers more public amenities, but owning a townhouse usually means more freedom with the higher purchase price. It should be noted that certain types of loans may have restrictions on the types of condos or townhouses you can purchase, especially government-backed mortgages like VA loans.
Long-Term Value and Resale Outlook
Whether you own a townhouse or condo, there is potential for selling it in the future. Generally, the long-term value of a townhouse is greater in suburban areas because an owner can make improvements to increase its value. Therefore, the value will appreciate faster in many markets.
However, a condo in an urban setting may be a wiser investment because of its rental potential. Many city residents want affordable living options that are temporary, so you could rent out your condo for a great rate, even if the value will not appreciate as fast as a townhouse.
Lifestyle and Living Experience
Lifestyle is another factor to consider when you are looking at condo vs townhouse ownership. Since there are fewer common areas in a townhouse, you can enjoy more privacy and outdoor living. This makes it ideal for growing families.
Life in a condo is much different, especially since complexes with many units are often located in urban areas. There will likely be more noise and shared walls, but the potential for community interaction is very high because of public amenities. Condos typically appeal to city dwellers and minimalists. Townhouses work well for families who don’t mind the extra maintenance responsibilities.
Pros and Drawbacks of Condos
Let’s look at a breakdown of the pros and cons of living in condo buildings rather than townhomes:
Pros:
- Affordability
- Low maintenance
- Community amenities
- Shared spaces
Cons:
- Higher HOA fees
- More restrictive HOS guidelines
- Less privacy
- Some financing restrictions
Townhouse Advantages and Disadvantages
If you are interested in a townhouse instead of a condominium, there are several advantages and disadvantages to consider:
Pros
- More living space inside
- Owning land
- Better resale value
- More potential for home renovations
Cons
- Higher maintenance burden
- Higher upfront cost
- Shared walls
- Less access to shared amenities and services
Choosing the Right Fit: Self-Assessment Guide
The condo vs townhouse debate will look different for every buyer. Some people base their decisions entirely on finances and future investment opportunities, while others are focused on the lifestyle of each option. Let’s examine a few categories to help you assess the best path for purchasing a condo or townhouse.
Your first consideration should be your desired lifestyle. If you are content without any outdoor space, other than a balcony or parking space, then a condo is a more efficient purchase. Plus, there may be outdoor areas available to all condo owners in the complex that you can use instead. However, if you prefer a quieter and more private lifestyle, a townhouse is superior.
Next, you should examine your budget for the purchase. If you have enough money saved for a significant down payment, you may be able to afford the higher price of a townhouse. Higher monthly expenses are more likely with a condo due to HOA dues, so high income could be ideal for condo ownership.
Another question you should ask yourself is, “How much maintenance am I willing to handle?” If you want less work on your shoulders, a condo with an involved HOA is the solution. If you are willing to do more work yourself, townhouses offer those opportunities.
Lastly, think about your future goals, particularly regarding finances. Do you want to rent out a nice condo in a busy city? Are you seeking higher resale value in a suburban location where families can thrive? Your long-term goals should play a role in deciding on condo vs townhouse ownership.
Mortgage Considerations for Each Property Type
Whether you want to buy a condo or a townhouse, financing will also be part of your decision. Most people will take out loans to purchase these properties, just as they would for single-family homes or rental properties. Every property type is viewed differently by lenders, so you must research available lenders to understand their terms.
For example, FHA loans have stricter requirements for condo purchases because many condo buyers may want to rent them out. Since townhouses tend to be more expensive, you will likely need a larger down payment, which will affect monthly payments and the loan-to-value ratio. Insurance can also vary between these property options, with condos sometimes sharing the burden of insurance with other neighboring units or complex owners. A property appraisal can also affect your ability to secure financing.
Final Thoughts on Choosing Between a Condo and a Townhouse
Buying any type of real estate property is a major decision. Prospective buyers must consider the key differences between condos and townhouses, such as ownership structure, homeowners association costs, HOA requirements, maintenance burdens, lifestyles, and home loan options. You should assess your budget, personal goals, and preferences before making this decision.
If you have done your due diligence and researched both options, it will be easier to choose the more attractive option.
FAQs: Condos vs Townhouses
Is it better to buy a condo or a townhouse for a first-time buyer?
It all depends on your preferences and financial situation. Townhouses are closer to single-family homes, so they are ideal for families who want privacy. If you are okay sharing one or two walls with neighbors and having no outdoor space, a condo is a better choice.
Do townhouses or condos hold better resale value?
On average, townhouses maintain better resale value, especially in suburban markets. Although you have to worry more about maintenance and property taxes, you can invest in the home to improve it and raise the resale value for greater profits.
Can you finance a condo or townhouse with an FHA or VA loan?
Generally, you can purchase most condos or townhouses with FHA or VA loans. However, these loan programs may have requirements regarding appraisals, occupancy, and down payments. For example, an FHA loan cannot be used to purchase a property that you won’t occupy, so you cannot buy a condo that you plan to rent out. Contact a lender directly to determine what properties are eligible for financing through FHA or VA programs.
