How to Buy a Condo or Townhouse

by Elizabeth Rosen, Contributor

If you are considering buying a house, you should explore all the options first. You may choose to buy a “regular” single-family house, or you might want to learn about hybrid homeownership options such as condos and townhouses. These types of real estate have steadily gained popularity over the years because they are often less expensive and come with extra amenities (pool, gym, etc.). However, they also have less popular features like association fees and shared walls.

The information below will help you understand how condos and townhouses work, and how they differ from buying a detached house.

What Is a Condo?

A condo, or condominium, is a multi-tenant building (e.g., apartment complex, townhouse, or multi-family dwelling) in which the “tenants” actually own their units, but not the land beneath them.

Condos are governed by a special set of rules called Covenants, Conditions and Restrictions (CC&Rs), which may vary by development. The CC&Rs are enforced by their elected condo association, or Homeowners Association. These rules typically include constraints on noise levels, pets, and remodeling.

To own and live in a condo, you must also pay condo fees to maintain the building. Buying a condo (as opposed to a single-family house) means shared spaces, common areas, and often smaller living conditions. However, condos are generally less expensive and may come with amenities such as a pool, a gym, and extra security.

What Is a Townhouse?

A townhouse, sometimes called a “townhome” or “row house,” is a dwelling that combines the features of a single-family house and a condominium. If you own a townhouse, you actually own the land that it’s on. Therefore, townhouses cannot be built on top of each other (like condos), but they may be adjacent to one another.

Townhouses may be single-storied or multi-storied units, duplexes or triplexes, or part of a large townhouse community. They also come in a variety of shapes, styles, sizes, and prices. Most townhouses include a small outdoor space (yard, deck, or patio) and larger complexes may offer a pool, tennis court, gym, or playground.

If you buy a townhouse that is part of a large complex, you may be subject to fees for maintenance of the common areas. While it is not always the case, some townhouse communities have a Homeowners’ Association that handles community issues and collects dues. At the very least, you will be responsible for the upkeep of your own yard ― although you may be limited as to how you can decorate the exterior of your home.

Similar to condominiums, living in a townhouse community will offer less privacy, but also more security. Townhouses are often categorized as “middle ground” between buying a house and buying a condo unit. And while townhomes are generally less expensive to buy than single-family detached houses, keep in mind that the return on your investment may be lower.

Factors to Consider When Buying a Condo or Townhouse

Cost ― Since condos and townhouses are less expensive to build than detached homes, you may be able to get more for your money.

Limited Freedom ― There will be certain restrictions on home improvement projects, remodeling plans, and any changes made to the exterior of the dwelling.

More Security ― Neighbors are close-by and some complexes provide gated parking and a security system.

Less Privacy ― Shared walls and closer quarters mean less “personal space,” particularly outside, where most of the grounds are considered common areas.

Outdoor Space ― Units may come with a small patio or deck, and common spaces may include a recreation center, gym, playground, pool, or tennis court.

Maintenance ― You are responsible for maintaining your own unit, and you’ll most likely be charged fees for general maintenance of common areas.

Association Fees ― When you enter into community living, you are generally required to share responsibilities and costs through monthly association fees.

Association Management ― While most complexes are managed by a professional company, some associations are self-governed and consist of elected members from that community.

Investment Value ― Condos and townhouses may appreciate differently than single-family homes, and may not yield the best return on your investment.

Overall, buying a condominium or townhouse can be a great alternative to buying a single-family detached house. However, it is important to understand the differences between these types of living before you make any final decisions.