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I’ve had a lot of questions lately from buyers asking my thoughts on buying a townhouse versus a condo.
Condo
A condo refers to a property that falls under “condominium ownership,” meaning everything within the walls belong to the owner, but everything from the walls out belong to the Condominium Association. Each individual condo owner has part ownership in the Condominium Association. Typically, condos include apartment-style properties and some townhouses. There are lifestyle choices that might help you make a decision. Condos:
- do not require yard work
- do not require exterior maintenance
- have shared walls in all four directions
- usually have shared main entrances
From an investment perspective, typically condos are the first kind of property to lose value in a down market, but they are the first kind of property to gain momentum when a down market starts to turn around because their lower prices attract first-time home buyers.
Townhouse
In this area, fee simple ownership typically includes single family homes and most townhouses. Many people prefer single family homes and townhouses because they offer more privacy and the opportunity to have an outdoor living space.
You can certainly get more bang-for-your-buck by purchasing a fee simple ownership property as opposed to a condominium ownership property. Single family homes and townhouses usually have lower monthly Home Owner’s Association (HOA) fees: $60-$70. Monthly condo fees start at about $225 in the suburbs and can get as high as $800 for some of the luxury buildings close to Washington, DC. I put together a table to show how this affects a monthly payment. This is very generic as it would be too hard to cover all contingencies. The table is based on the following constants:
- 5.25% interest on a 30-year fixed mortgage
- $70 monthly HOA fee for the Fee Simple payment
- $300 monthly Condo fee for the Condo payment
- Taxes that are proportional to property value so taxes are higher for higher loan amounts
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