Townhouse vs. House: Everything You Need To Know Before Buying

For home buyers who aren’t put off by having close neighbors, townhouses provide an avenue to neighborhoods that might otherwise be outside their budget. If you’re considering purchasing a townhouse, it’s worth taking stock of their unique benefits and drawbacks.

What Is a Townhouse?

Also known as a “row house,” “townhome,” or, in the UK, “terrace house,” a townhouse is a multi-level, single-family residence that shares one or both side walls with another townhouse, forming a continuous front.

In conversational usage, many people use the terms townhouse, condo and duplex interchangeably. A stricter definition from the U.S. Census Bureau lists the following features to define single-family attached housing:

• Separated by a ground-to-roof wall;
• Separate heating system;
• Individual meters for public utilities; and
• No units are located above or below.

Pros and Cons of Owning a Townhouse vs House

Like any type of home, townhouses have their advantages and disadvantages. Here are some of their pros and cons when compared to detached single-family homes.

Townhouse Pros

• Lower heating bills. Being nestled between other heated buildings means your furnace doesn’t need to work as hard to keep the temperature comfortable.
• Lower purchase price. Townhouses typically sell for less than a comparable detached home in the same neighborhood. This makes them a great way to own a home in a popular area.
• Less exterior maintenance. Townhouses typically have smaller lot sizes, and their shared walls mean less time cleaning and maintaining the exterior. If there is a homeowner’s association (HOA), exterior maintenance is usually covered by the monthly association fees.
  

Townhouse Cons

• Less exterior space. If you love a big yard to play in or have dreams of an expansive garden, a townhouse’s limited lot size may be a deal breaker. Although this depends on the property! — some townhouses have a shared public yard or spaces, while others have essentially no yard at all.
  
• Less privacy. Sharing walls with your neighbors means you’re more likely to see and hear them.
  • Pro tip: If you’re considering buying a townhouse and wondering about noise, ask your agent to arrange a walk-through in the evening, when the neighbors are home and making noise.
• Less sunlight. By definition, a townhouse has either one or two sides with no windows.

It’s worth noting that many townhouse builders design their properties to minimize the issues listed as ‘Cons.’ Jason Gelios, Michigan-based author and Realtor with Community Choice Realty points out, “Truth be told, many townhouses are built with added insulation and layers of drywall in between adjoining walls to reduce the noise travel caused by neighbors. Many townhomes are also set up with open floor plans and additional windows that allow for more natural light.”

Do Townhouses Have an HOA?

It depends. While there’s no requirement that townhouses have an HOA, a significant majority do have some kind of agreement in place. (For example, the Census Bureau reports that 71% of attached single-family homes in the Northeast U.S. are in a homeowners’ association).

One potential pitfall for townhouse ownership is maintenance. If a townhouse is sold as a standalone unit, potential conflict can arise over shared spaces, like the walls, roofs, driveways and exterior landscaping that spans one or more townhouses. This is why many townhome developments rely on an HOA or other agreements to help coordinate maintenance and landscaping.

What’s the Difference Between a Condo and a Townhouse?

It’s common to hear “townhouse” and “condo” used to describe a home, but they actually describe two concepts. “Townhouse” describes a type of physical structure while “condo” (or condominium) describes how the ownership is legally created.

As a real estate broker in California, SLV Real Estate‘s Paul Lazaga has extensive experience with both townhouses and condos. He breaks it down like this: “In general, with condominiums there is communal ownership of land and structures in the subdivision with rights to your units spaces, whereas some townhomes you own the land and structures of your home, typically with communal ownership of common areas.”

The key differences include:

• Ownership of a condominium only extends to the interior wall. Condo associations own and manage the exterior separately from the individual unit ownership.
• Condo associations also own the land the property sits on. Unless a townhouse is a condominium, it includes ownership of both the exterior of the home and the land it sits on.

Which Townhouse is Which?

To quickly recap, the three types of townhouses you might encounter include:

• Townhouses without an HOA (the least common situation);
• Townhouses with an HOA (much more common); and
• Townhouses that are condominiums, governed by a condominium association (also very common).

So how can you tell which is which? Unfortunately, you’ll have to do some research.

Lazaga emphasizes that you can’t tell if a given townhouse is a standalone property or a condo simply by looking at it. “Purchasers of either type should closely read the Homeowners Association documents,” he cautions, “to determine the rules and responsibilities of owners and their association in either case.”

Is a Townhouse a Good Investment?

Owning real estate is an excellent long-term investment, and townhouses are no exception. Just like a traditional single-family home, the value of a townhouse is likely to increase faster than inflation in the long term. And just like other homes, a townhouse’s overall value will greatly depend on location.

Jason Gelios puts it this way: “[Townhouses] can not only increase in value year after year, this type of home can appeal to a wide variety of people because townhomes tend to be a more affordable option in an area with higher priced homes.”

Ultimately, the strength of a townhouse as an investment depends on your specific situation. Just like traditional single-family homes, purchasing a townhouse is a poor investment if you expect to move in less than five years or need access to liquid assets.