In the past, we’ve written about the distinguishing factors when considering a detached versus attached home. But what if you are considering a condo versus townhome? Several factors can make living in each, and profiting from each, quite different. In this article, we’ll look at the definition of a condo versus a townhome, and the factors you should consider when deciding which is right for you.
Definition of condominium
A condominium is defined by the financial arrangement owners enter into. Specifically, by purchasing a condominium, you are buying a unit within a larger building with several units, and therefore several or many other owners. The common areas are jointly owned. To govern this arrangement, condominiums have a condo association with a board of directors.
Definition of a townhome
A townhome, or townhouse, is not a financial arrangement, but rather a building type. It is a single-family home that shares one or more walls with another single-family home. A condo could be a townhouse building, but townhouses only occasionally have condominium financial ownership. Unlike a condo where anything outside the unit is jointly owned, a townhome owner owns both the interior and the exterior, including lawn and roof.
Factors to compare
There are several factors that differ between condo and townhome ownership. You’ll have to decide which are the most important to you.
Affordability
Both townhomes and condos are considered affordable, with condos tending to be less expensive with lower property taxes.
Return on investment
Condos near urban up-and-coming neighborhoods can see high rates of appreciation. Townhomes, on the other hand, typically have lower appreciation than other property types. Loft.ai recommends buying a Class C condo in a Class B neighborhood for the best appreciation.
Investment risk
While condos have the potential to appreciate nicely, they are also a riskier investment because you share ownership with other people. So, others’ foreclosures, for example, can affect your value. A recession could be disastrous. Because the investment risk is higher with condos, financing can also be a more difficult, especially in associations with a lot of delinquency.
HOA fees
Condo association fees are higher than townhome fees. But when you calculate what you’d pay for maintenance, lawn care, etc. on your own, pooling the fees offset that cost nicely. Inflation, however, is important to consider because it impact higher HOA fees more than it will lower HOA fees.
Privacy
Because you’d share less of the property with townhome neighbors that you would condo neighbors, townhome owners tend to have more space and likely less exposure to others’ noise.
Control
The more space you share with other owners, the more rules the HOA will impose. This is not a bad thing… it keeps the peace and helps preserve property values. But, you’ll have less control over what you can do in shared spaces, as well as your own space. When considering a purchase, read the association documents for what to expect.
Security
Urban condominiums often have security personnel, like a doorman. In suburban settings, other types of condo security are also more common than with townhome communities.
Amenities
It is common for condo communities to have a fitness room, party room, and often a swimming pool. Luxury condominiums may even have more lifestyle amenities, such as a dry cleaner on site. Townhome communities typically do not have these amenities.
There are pros and cons to each type of investment, but understanding the differences can help you determine with confidence which is right for you.
