Condo vs. Townhouse: What’s the Difference?

in First Time Buyer on by
A row of townhouses

Apartment hunting gets more challenging every year. Soaring prices, fluctuating rent rates, gentrification, employment instability, and lots of other factors make finding an acceptable home at an affordable price feel nearly impossible.

In the midst of this taxing journey, you’ll likely consider the options of a condo or townhouse over a traditional apartment unit. But the more deeply you delve into these options, the more confused the choices often become. Although the two appear almost identical on paper, there are a couple of key differences between them that deserve consideration.

The Fundamentals

Both condos and townhouses can be found all over the place, which is a plus since you don’t necessarily have to settle on living in an exclusively suburban, rural, or urban neighborhood. And similar to detached family homes, they’re both available in one, two, and three-story floorplans.

Then there are the differences. A condo most resembles an apartment since it’s an individual unit in a building or community of buildings. You still pay a monthly fee to live there, but it’s a mortgage payment instead of a rent payment, meaning you own the place, not a third party.

A townhouse looks much like a condo. The difference is that one or more of their walls are communal, or structurally shared with the townhome(s) next door. If you’ve ever seen a rowhouse, a townhouse is basically the modern version of that architectural style.

Ownership Rights

Buying a condo means you own the unit in which you reside. However, you share ownership of the building, grounds, pool, gym, activity center, airspace, and any other common area utilized by the people living in the surrounding condos.

Conversely, if you buy a townhouse you not only own the structure itself, you’re also the owner of the land it’s built on. But you also share walls with townhouses on either side of you.

When shopping these two options, be sure you understand the land ownership rights behind them. This point is especially important when it comes to yards or gardens. If you don’t own the land, you don’t have the final say on how those exterior areas are used.

All About Homeowners Associations

At first glance, homeowners associations (HOA) seem like a great idea. It’s a board comprised of fellow condo or townhouse residents that, in theory, ensure that the common areas and grounds are well maintained. In some cases, this group also oversees the exteriors and roofs of each unit to make sure they are kept in shape. The flip side to this is that all residents of the community must pay HOA fees either monthly or annually, and they’re often pretty steep.

On top of that, this group also establishes the rules and regulations by which the tenants are expected to abide. This includes rules that free-standing homeowners never have to endure, such as how much noise you can make, how large a pet you can own, if you can dry your laundry on a clothesline in the backyard (even if you own the land), whether you can have a shed in your backyard, and/or what type of mailbox you put out in front. Granted, these board members are elected by the community, but if you value the right of individual choice, this group can make your life a living hell. Check out the HOA handbook with your lawyer before you sign anything.

Price Comparison

Buying a condo or townhouse is still generally cheaper than purchasing a single-family home, even if the HOA fees are high. Both options also make for excellent starter homes where you can build equity and boost your credit rating if you envision a freestanding single-family home in your future.

Of the two, condos are typically cheaper than townhouses simply because they don’t include any land. On the other hand, condo HOA fees are generally higher than those for townhouses because more space and/or amenities are shared by everyone.

Other hidden costs are home and fire insurance premiums, home inspection fees, and property taxes. These charges vary significantly based on the type of home you’re purchasing, your location, and how much your mortgage is (with mortgage interest rates generally being higher for condos than for townhouses).

Resale Considerations

If you’re purchasing a condo or townhouse solely to sell it for profit to use as a down payment on a regular single-family home, understand that it may take a while — or never happen. No one can predict where the housing market will be in six months or even six years, after all, regardless of whether you buy a tiny condo or a sprawling mansion. There are unfortunately so many factors out of your control in situations like these that any investment you make is always a calculated risk.

Still, a fine-tuned HOA will assure your community makes a good impression on potential buyers. And if you keep your home well maintained and up-to-code, it’ll make an added incentive for prospective sales.

There are many aspects to consider when making any major purchase. Take your time, weigh all the factors carefully, and run the details by a third party, and chances are you’ll end up making a sound decision.

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