Condo vs Townhouse: How to Easily Know the Difference

I grew up believing that the only difference between a condo and a townhouse was their architecture and location. I discovered that my initial understanding was wrong. When it comes to condo vs townhouse, I finally learned the differences. 

I first want to acknowledge that I blame watching Miami Vice growing up. It made me believe that a condo had to be right next to a beach. There are condos in the midwest, where I now live, and trust me when I say that there are no beaches here in Nebraska!

If you’re looking to purchase your first home, condos and townhouses are great starter options for new homeowners. On the other hand, if you’re nearing retirement and all your kids moved out, then these types of properties might be for you!

What is a Condo?

A condo (short for condominium) is similar to a single unit in an apartment complex or a group of community buildings. However, the resident owns the unit versus paying rent to a landlord.

Residents of the building share the provided amenities, such as parking, a gym, and a swimming pool. Condo owners pay a homeowner association (HOA) fee to avail of these amenities and maintain the building.

What is a Townhouse?

Townhouses share walls with other townhouses adjacent to them. They are multi-level properties built in a row of one another. 

The resident owns the entire property (interior and exterior), including the outdoor space (i.e.,  land). There are also homeowner’s association fees with owning a townhouse for certain services, such as landscaping, trash removal, and snow removal. 

Condo vs Townhouse: What are the Differences?

Buying a house is one of the most significant purchases you’ll ever make. So, it’s essential to understand the differences between a condo and a townhouse when making your decision. Townhouses and condos are usually in great neighborhoods or urban areas that provide easy access to different venues, such as restaurants and shopping. However, there are also costs associated with each one that a homebuyer should consider when looking for the perfect home.

Here are some key differences between a condo and a townhouse:

• Ownership
• Square Footage
• HOA
• Privacy
• Insurance
• Taxes
• Appreciation

Ownership

Ownership is the differentiating factor between a condo and a townhouse. 

Residents of a condo own their unit but share the building with neighboring units. On the other hand, residents of a townhouse own the interior, exterior, and land.

Therefore, a multi-level property doesn’t necessarily mean it qualifies as a townhouse. A resident that only has ownership of the interior and not the land is living in a condo. 

So, if someone sees your multi-level property and asks, “Is that your townhouse?” You’re not lying when you say, “That’s mine.”

Furthermore, the level of home-ownership can have an impact on your wallets, such as HOA fees, property taxes, and insurance. I will go into these items further as it adds to differentiating the two.

Square Footage

A condo is very similar in size to an apartment unit. Thus, it has less square footage than a townhome. 

Having less square footage is not necessarily a bad thing. It’s all a matter of preference. 

For example, parents that are now “empty nesters” may prefer downsizing from single-family homes. However, if you are a growing family, having more space with a townhouse might be more beneficial.

It is important to note that square footage does have an impact on your insurance premium and property taxes. More on these expenses later.

HOA

Whether you live in a condo or a townhouse, you’ll be part of a homeowners association (HOA) and be required to pay monthly HOA fees. 

A board of residents comprises the HOA and sets rules and standards for the community. The HOA fees cover the upkeep and maintenance of common grounds, facilities, and, in some cases, the exterior. 

The HOA can perform services for home maintenance not included with owning a detached house.

Residents of condos tend to pay higher HOA fees, mainly because they offer more amenities than townhouses. However, although townhouse owners pay lower HOA fees, they lose the easy accessibility of similar facilities, such as a gym, not provided by their HOA. 

The good news about a townhouse is that it doesn’t force residents to pay for a service they may never use. It puts more control in their hands.

A home buyer should ask the property managers what amenities are included as part of the HOA fees and determine if it’s worth the cost.

Privacy

A townhouse is not as private as a detached, single-family home because it shares walls with other townhouses. However, it does offer more privacy compared to a condo!

With a townhouse, you can come and go as you please. With a condo, you’ll be sharing more of the common areas and shared spaces, such as hallways, elevators, the gym, and the swimming pool. 

This sharing of amenities might turn some people off, especially if you have residents calling you out for not wiping down the gym equipment!

However, the lack of privacy is not necessarily a bad thing. Some people might prefer living in a community where everyone knows each other. Townhouse communities can be social, but not as much as condo communities.

When I could hear the neighbors below my unit hitting the ceiling with a broom, I knew it was time to move on. Now I live in a place where I don’t feel so bad when my kids cry.

Insurance

Lenders require that a property they’re financing be covered by home insurance. This kind of insurance is not the mortgage insurance part of your monthly mortgage payment. Instead, home insurance intends to cover damages to the physical property and your personal belongings.

Insurance will have a higher premium with townhouses because it needs to cover everything owned by the resident. As noted earlier, the ownership of a townhouse is much greater than the ownership of a condo. 

For example, an owner of a townhouse owns the entire property (interior and exterior). Hence, the insurance will need to have more coverage, resulting in a higher premium.

The insurance premium for a condo is relatively less because the resident owns just a single unit. Regarding the care and exterior maintenance of the building, the homeowners association fees fund this service.

When it comes to insurance premiums for condo vs townhouse, a condo is a definite winner!

Taxes

Condo residents only own a single unit, which is relatively smaller than a townhouse, while residents of townhouses also own the entire property.

Thus, property taxes for condos are much lower than property taxes of townhouses. 

You thought you could get away from paying rent by owning your own home. Unfortunately, one of the responsibilities of owning a home is having to pay property taxes! 

I describe to my son that property taxes are like someone renting a property from the government. Owners are, in a way, still renters. Even after the mortgage is paid off, taxes will continue to go up.

So, regardless of what kind of property you own, you still have to pay taxes.

This argument makes renting an apartment more appealing than owning a home because the landlords are responsible for paying the tax!

Appreciation

A property’s appreciation, regardless of type,  is a function of the current real estate market. If purchase prices go up, so will property valuations! 

Unfortunately, no one can fully predict the future of the housing market. Thus, I’m wary about anyone purchasing a property with the hopes of banking on appreciation.

Not every property appraises the same. There are a lot of factors that are taken into account when determining an accurate valuation. 

There may not be many improvements you’re allowed to do on your property due to the rules and regulations set by the HOA. However, the quality of the upkeep the HOA has for the community can work in your favor when you plan to sell.

The HOA doesn’t necessarily increase the value of your property. Instead, the HOA can make selling your home in the future more attractive.

Conclusion

A condo and a townhouse are great options for a first-time homebuyer, mostly because of their affordability. They don’t cost as much as traditional single-family homes and are a good entry into building wealth.

You also might have an empty-nester home and want less property to maintain. Condos and townhomes also fit this need!

You can find these kinds of properties everywhere, whether you live in New York City or Omaha!

Reach out to a seasoned real estate agent or real estate broker to help you find your dream home and put together a great deal! Ask many questions to the homeowner’s association (HOA) and determine what perks they provide. 

Before you buy a condo or buy townhouse, weigh the pros and cons for you and your family to own your new home. What someone might consider a negative might be favorable for you!