What You Must Know Before You Buy a Townhouse
Oct 28, 2019
If you’re in the market to become a homeowner, you might be thinking about buying a townhouse.
They’re extremely popular among first-time homebuyers, but there are also plenty of owners on their second or third who would never consider anything else.
Nevertheless, before you go shopping for the perfect townhouse, it’s vital that you understand exactly what they entail and the pros and cons of owning one.
Townhouses vs. Condos
A townhouse is similar to a traditional house, except that they are connected to other houses through communal walls. This is why townhouses are often located in urban areas. Space is limited, so developers opt for townhouses that make the most of it.
Usually, each townhouse has both a front- and backdoor that leads directly out of the property. However, some townhouses may have backdoors to shared hallways that lead to covered garages or underground parking.
Townhouses tend to be at least two stories, as well, though it’s not uncommon to find units that are three or even four stories, depending on where they’re located. In especially crowded cities, four-story townhouses aren’t rare at all.
Though they have communal walls like apartments, residents own their townhouses. They don’t pay rent and have complete control – or nearly complete control – over their unit’s exterior and interior. The degree to which that’s true depends on whether or not the townhouse has a homeowners association (HOA). When there is an HOA, the association will usually handle maintenance costs for communal areas and keeping the grounds manicured.
A condo is similar, but there are some key differences. While residents of condos also own them, they don’t have the same control over their exteriors. They may be allowed to do whatever they like with the inside of their condos, but the exterior of their unit is actually owned by the HOA. This includes the lawn.
Pros and Cons of a Townhouse
Every townhouse is different, so it’s important that you research any unit you plan on purchasing to determine its unique pros and cons.
That said, the following pros and cons apply to townhouses in general and are, therefore, worth considering before you begin shopping around.
One of the main draws of a townhouse is that they’re usually more affordable than traditional homes. While much of this is because townhouses tend to be smaller and usually lack yards, the tradeoff is that you can buy a townhouse with plenty of space right by a number of amenities, which is quite the selling point for many people (we’ll elaborate on location in a minute).
There are also maintenance and upkeep costs to think about. Again, we’ll go into more detail shortly, but to put it simply, less can go wrong with a townhouse, so you don’t need the same amount of money set aside to help pay for what your insurance company won’t.
Your townhouse’s HOAs will help with maintenance, too.
Of course, HOAs often accompany townhomes and aren't always the most desirable option to be a part of.
While this certainly isn’t always the case, many residents sometimes wonder if they wouldn’t be better off without them.
This is especially true when it comes time to pay their monthly dues. For a single-family home, HOA fees can easily be $200 to $300 a month.
Conversely, many people who own a traditional home would tell you that they’d gladly pay that if it meant they didn’t have to spend their weekends on chores to maintain their homes.
Con: Financing Can Be a Challenge
Many first-time buyers are shocked to learn that lenders don’t just underwrite loans for them as they would a traditional house.
In fact, many lenders won’t provide mortgages for them at all.
Others will, but they underwrite them as if they were condos. They may treat the townhouse complex as if it were a condo complex, which means looking at how many are owner-occupied vs. rented. As a result, they may offer you a mortgage, but you might not like their terms.
Nonetheless, most people aren’t paying in cash when they buy a townhouse, so someone is lending to them. You’ll just have to do some research to find out how your neighbors got their financing and then compare those options before making a choice.
Pro: Location, Location, Location
Another enviable perk about buying a townhouse is that you can enjoy all the benefits of homeownership and living in or near a big city. This could mean a shorter commute to work or even living closer to your child’s school.
Purchasing a traditional house usually means accepting the fact that living out in a suburb comes with longer drives on a regular basis. Decide to buy a townhouse, and you should have no problem finding one near your favorite amenities.
Con: Likely to Appreciate Slowly
Townhouses don’t appreciate nearly as fast as traditional homes because they don’t entail the same amount of land. While most townhouse-owners don’t care about their minimal yards – or the complete lack of them – it means appreciation takes longer.
Pro: Potential Rental Income
That being said, many townhouse owners get around the appreciation problem by simply turning their townhouses into rental properties once they’re ready to move into a traditional property.
It’s definitely not for everyone. Many owners are fine with selling if it means making their next mortgage more manageable.
However, it’s still nice to have the option. There’s no reason to think townhouses will ever go out of style, especially in urban areas where their modest footprint is so desirable. So, by the time you’re ready to move, renting out your townhouse could be a no-brainer for a second source of income.
Get up to $15,000 Towards The Purchase of a Townhouse in Your Area
If you’re still excited about everything a townhouse has to offer, we’d love to help you enjoy the purchase even more with our Buyer Refund Program. Just choose your real estate agent through SimpleShowing, and you could get as much as $15,000 when you close.