When purchasing a home, you’ll be forced to consider a lot of factors like outdated kitchens, one or two car garages, yard or no yard, etc and one of the most important factors is what type of home you are looking to buy. Buyers will most likely be deciding between a single-family home, a condo, or a townhouse and if a single-family home isn’t an option, it’s important to know the differences between a townhouse and condo. There are a few similarities between the two and a few differences as well.
Condos and townhomes
Condominiums are similar to an apartment in that there is a unit within a building or high rises which shares walls with other units. However, unlike apartments, condos are usually owned by someone rather than rented from a landlord.
Like a condominium, a townhouse is owned by someone and also shares walls with other units but often looks more like a row home. A townhouse can offer a bit more privacy than a condominium.
Townhomes and condominiums can be located in urban, suburban or rural areas and can be multiple levels. The main difference between a townhome and condominium is the ownership structure and also fees.
Condo ownership vs. townhome ownership
When you purchase a condo, you personally own the interior of the unit itself and share joint ownership of the building. The joint ownership amongst condo owners also includes amenities such as gyms, common spaces, pools, ect.
Townhouse owners share many similarities to single-family detached homes in that you personally own the structure and the land beneath it. The only difference from a single-family home is that the structure shares some walls with other units or structures.
Condos and townhomes are more of an ownership term rather than an architectural term. You can live in a condo that looks like a townhome so it’s important to ask about ownership rights when making a purchase decision.
The biggest thing that separates a condos from townhomes and single family residence is the existence of HOA fees and how they are structured. Condos almost always pay monthly homeowners association fees which pays for the maintenance of common areas of ownership including gyms, external elements, roofs, etc. While a townhome may or may not have an HOA, a condominium always does.
The HOA is run by a group of other condo owners (of which anyone is allowed to join if there is an opening) who handles the day to day property maintenance of common areas.
In addition to overseeing the property maintenance, the HOA will create rules for all the owners which can include renting out the home, noise, and what can be done with the property. For example an HOA may prohibit the owner from renting the home on a short term rental site like AirBnb.
Cost of a townhome vs. a condo
Townhomes and condos are attractive because they tend to be a bit cheaper than a single-family home, making them easier to afford for first time homebuyers. Buying more home than you can afford is never a good idea so buying something cheaper might behoove someone that is following a strict budget.
A condo is usually even cheaper than a townhome because there aren’t any ownership rights of the land. However, the condo HOA fees can be higher since there are more jointly-owned spaces to pay for.
Additionally, there are other costs to consider like property taxes, homeowners insurance, mortgage interest rates etc so it’s important to factor these items into the budget.
There is no such thing as guaranteed investment and the same holds true when purchasing real estate because there are many market factors that are outside of your control. However, there are factors that are in your control and some apply to owning a condo or townhome such as ensuring the HOA is well run / funded.
A well run HOA should be able to help with resale value because the HOA exists solely to help maintain property values. HOAs are responsible for maintaining landscaping and other general areas so there is much less to worry about when it comes to making a good first impression to potential buyers. On the flip side, a townhome may not have an HOA so it would be the responsibility of the seller to maintain these items.
Additionally, appreciation rates for condos and townhomes have often been slower than for single-family residences. However, depending on the area, the appreciation rates for condos and townhomes can be higher.
Both condos and townhomes have a fair amount in common with each other so it comes down to personal preference when deciding which one is best. Find a property you want to buy and dig into the ownership rights, hoa fees, and cost. A good real estate agent will be able to help you determine the differences when you are ready to compare properties.