Many people use the terms ‘condo’ and ‘townhouse’ interchangeably. While they do have many similarities, they are actually different types of real estate. Either one can be a great choice for your primary residence or even an investment property. But, how can you tell which would be a better investment? Let’s start by looking at what each one is as well as the pros and cons of each so you can answer the condo vs. townhouse question for yourself!
Key Features of Condos
Here are some of the most important features that describe condo ownership:
- Residential real estate
- Comprised of individual units owned by individual homeowners who own only the interior of the unit
- Owners maintain and repair their own unit’s interior
- Owners pay maintenance fees for shared amenities, common areas, and the building’s exterior
Pros and Cons of Condos
Now, let’s take a look at some of the advantages and disadvantages of condo ownership:
- Pro: Shared amenities – Residents can enjoy the use of amenities such as a pool, parking garage, or gym without having to maintain it themselves. Upkeep of these amenities is covered through association dues or maintenance fees paid by condo owners.
- Pro: Exterior maintenance – While condo owners are on their own for repairing and maintaining the inside of their residence, maintenance of the outside is covered by maintenance fees or dues. The same holds true for any other shared areas that all owners can access. This is the perfect solution for people without the time, expertise, or physical ability to be their own handyman.
- Pro: Affordable home ownership – Many homeowners choose to purchase a condo vs. a single-family home simply because of overall cost. If detached single-family homes are expensive in a particular neighborhood, purchasing a condo in the same area is typically more affordable, even with association dues factored into the price.
- Con: More noise – Since condos are close together and often share walls, noise can be an issue, especially if you have disrespectful neighbors.
- Con: Reduced space – Depending on the owner, this could actually be a pro or a con. Seniors looking to downsize and have less to take care of, for example, may find less space to be an advantage. A growing family or someone who enjoys their own yard, however, could find a condo to be limiting.
- Con: Rules and fees – The condo complex is overseen and maintained by a Homeowners Association (HOA). This, of course, comes with fees and various restrictions that are unique to each complex.
Key Features of Townhouses
Now, let’s look at some defining features of townhouses, some of which are quite similar to condos:
- Residential real estate
- Comprised of individual units owned by individual homeowners who own both the interior and exterior of the unit
- Typically have multiple floors and a private entrance
- May have their own driveway, basement, garage, and/or yard
- May or may not be governed by a homeowners association
Pros and Cons of Townhouses
Of course, there are positives and negatives to townhouse ownership. Here are the most common pros and cons:
- Pro: Affordability – Similar to condos, townhouses are typically less expensive than their detached, single-family counterparts in the same neighborhood or city.
- Pro: Maintenance is easy – If the townhouse is governed by an HOA, maintenance fees cover expenses related to the upkeep of common areas and shared amenities.
- Pro: Shared amenities – Although not guaranteed, many townhouses have access to shared amenities such as parks, pools, or gyms.
- Pro: More outdoor space – Unlike condos, townhouses often have more outdoor space available to homeowners. There may be a private yard or patio area for outdoor entertainment, dining, or recreation.
- Con: Multi-floor living – Since townhouses often spread upward instead of outward, living takes place on multiple stories. Seniors, families with small children, or individuals with physical impairments may find this challenging.
- Con: Reduced privacy – Similar to condos, townhouses typically share walls with adjacent units. This creates the potential for more noise and less overall privacy. However, since neighboring units are not above or below them, there may be less of a noise or privacy issue than with a condo.
- Monthly fees – Association dues paid for maintenance and upkeep must be paid monthly (or perhaps yearly in some cases) and specific rules must be followed.
Condo vs. Townhouse – Which Is a Better Investment?
Ultimately, the answer to this question depends on your goals.
A condo could be a better investment if:
- You don’t want to be concerned with exterior maintenance.
- You want less space to take care of and don’t mind sharing common areas with others.
- You’re not concerned about a possible reduction in resale value if your HOA doesn’t properly maintain common areas, shared amenities, and the building’s exterior.
A townhouse could be a better investment if:
- You prefer to own both the inside and outside of your home and you don’t mind hiring out repairs and maintenance or doing them yourself.
- You like to have your own outdoor space, private entrance, and multiple stories.
- You want to have more control over your home’s resale value. Since you are responsible for the upkeep of both the inside and outside, you have more control over how well it is maintained.
If you are considering purchasing a condo or a townhouse as a rental property, there are several factors to consider. First, you must make sure that HOA rules allow for renting out individual units – some do not. Then, you must take into consideration all of the expenses related to repairs, maintenance, taxes, insurance, and so on. Once you run the numbers, you can determine whether or not this property will be able to provide positive cash flow and contribute to your real estate portfolio.
Learn More About Real Estate Investing
The condo vs. townhouse debate is just one of the questions you may encounter if you’re just beginning to learn about real estate investing. If you’d like to learn more about how to grow your passive income through real estate and even achieve financial freedom, I invite you to subscribe to my YouTube channel. There, you’ll find helpful real estate investing tips that my wife and I used to go from owning $0 in real estate to $5 MILLION in real estate by age 30. The wonderful world of real estate can be yours, too!