(This advanced blog summarizes real estate investing tips and insights Lofty AI has acquired from working with thousands of investors and institutional funds.)
Condo vs. Townhouse
This post teaches you whether you should invest in a condo or a townhouse.
Subtle hint: Invest in condos, not townhouses.
It also walks you through the differences between the two property types and the pros and cons of each.
Let's get started.
What is a condo?
- A condominium is an individual unit located in a building with other individual units.
- Unlike an apartment, a condo is owned by its resident, not rented from a landlord.
- Residents own and maintain the interior of their unit but don’t own the property on which it sits.
- The exterior, lawn, and shared spaces are maintained by the Homeowners Association or HOA.
What is a townhouse?
- A townhouse is a single-family home that shares one or more walls with other independently-owned units.
- Townhomes are often rows of uniform homes that are two stories or taller.
- Residents own their interior and exterior walls, lawn, and roof, as well as the insurance.
- Maintenance costs are determined by the community's HOA.
Condo vs. townhouse comparison
Which is a better investment?
Let's walk through the pros and cons of each property type to determine which is a better real estate investment.
Pros of investing in condos
- Amenities - Condos have more of a community built in than townhomes. This includes clubhouses, pools, and gyms. Because of these amenities, you're generally able to charge higher rents to tenants.
- Security - Most condo communities have security and are gated. This is helpful when convincing tenants, especially those with families, to move in.
- Less expensive - Condos are often less expensive than townhomes because they include no land.
- Appreciation - Condo's appreciate more than townhouses. This is because they tend to be near urban, up-and-coming neighborhoods primed for rapid appreciation.
Cons of investing in condos
- Potential HOA issues - Although you're paying high HOA fees, maintenance issues such as lawn mowing or pool cleaning may not be handled correctly.
- No privacy - Unlike townhomes, your condo is surrounded by neighbors above, below, and beside you.
- Rules - Each resident must abide by the community rules on issues such as visitors and pets. Rules change from one community to the next and are determined by the condo's property management company.
Pros of investing in townhouses
- More living space - Townhouses tend to be larger than condos. Most townhouses usually stretch to 2-3 stories.
- Privacy - Townhouse residents have more privacy than condo residents. Unlike condos, townhouses are detached and don't have neighbors on top, bottom, and on the sides.
- Lower HOA fees - Townhome owners pay lower monthly HOA fees because they pay for most of their upkeep.
Cons of investing in townhouses
- Lack of appreciation - Townhomes are notoriously known to appreciate less than other property types. While some investors view appreciation as a "nice to have", it's a crucial factor when considering a potential investment.
- HOA fees - Though you will be paying lower HOA fees than condo owners, you will still be paying HOA fees. These fees are generally around $300/month.
- Maintenance requirements - Townhomes have individual maintenance requirements. For example, you may be responsible for your own roof. These maintenance requirements are different from condo's, in which the HOA takes care of the exterior maintenance issues.
Which is a better investment?
Condos are a better investment. Property appreciation, extra security, and direct access to amenities more than make up for the extra $100/month you will spend in HOA fees.
Plenty of investors will see the higher HOA fees and assume condos are worse investments because of the hit to monthly cash flow. But that's thinking short-term compared to what you should be thinking about: The future worth of your property in the long term.
Buy a condo with Lofty AI
At Lofty AI, we show you cash-flowing condos located in neighborhoods primed for rapid appreciation, in just seconds.
Just toggle on the “Condo” filter, and you’ll immediately see condos that are cash-flowing, undervalued, and located in growth neighborhoods in over 30 markets. This makes finding properties out of state extremely simple.
You can even find motivated sellers that are desperate to get rid of their condo. When you come across a motivated seller, that lets you make a low-ball offer that is likely to be accepted.
Lofty AI isn't the only real estate investing software out there to find condos. But, it's the quickest and most accurate real estate investing platform.
If you're interested in learning more, you can request access by clicking the button below.