Pros and Cons of Buying a Condo, Townhome and a House
Having equity in property seems like a wise road to a carefree retirement unburdened with the heavy cost of housing, but you're not sure what type of residence is right for you. You are torn between buying a house, a condo or a townhouse. What should you do? To start, all three options of homes will appreciate in value over time and make for a good investment if you take care of the property. But what are the advantages of owning a house versus a condo or townhouse? Most likely, your decision will be based on your finances and preferences. What feels like heaven to one person is complete hell for another. We’re here to point out the pros and cons of the three main types of home-ownership.
Pros of Buying a Condominium
Price. A condominium is a unit owned by an individual in a building or community of buildings. Condos are usually the most affordable home-buying option for Americans. In 2019, the median price for condos and single-family homes was $270,000. You may think that this means there are no price differences between the two options, but that’s not the case. For one thing, you’re getting far more condo for $250,000 than you are a house in the same neighborhood (if you can find a house for $250,000 in that neighborhood). With that said, condos appreciation rates are slower to grow in value than homes and townhouses.
Maintenance. You only have to maintain the interior of a unit. You basically own everything walls in. The landscaping, the painting of the structure, cleaning the pool, raking leaves and shoveling snow -- all of this is covered with a homeowners association (HOA) fee. HOA fees vary widely, often based on how many common amenities the property offers and also based on location. You’ll find that even less desirable condos in a very good neighborhood will still have high HOA fees.
Amenities. Whereas you’re looking at spending thousands of dollars more for a house with a swimming pool, many condos have community pools. You often have a gym, tennis courts, dog runs, jogging tracks and more. Your HOA fees go towards maintenance of these amenities so you don’t have to push your sleeves up to keep your home in good shape.
Proximity. If being close to dining and entertainment is important to you, condos are often situated near downtown areas and cultural venues. When you buy a home, you’re usually farther away from shopping centers, for good or bad. Chances are that your commute would be shorter than in a home that would most likely be farther away. If you’re a social person and one who likes to be surrounded by other people at all times, a condo is a great choice. A condo unit may sometimes even closely resemble a single-family home but is usually surrounded by other units. There is a greater level of closeness with neighbors in condos.
Insuring a Condo: Most insurers who offer home insurance also offer condo insurance. To compare condo insurance rates, enter your zipcode here.
Cons of Buying a Condominium
If you buy a condo, you aren’t able to customize the exterior of your home or have a proper garden on the land, which is a communal property that is solely maintained by the HOA. You have little privacy in a condominium, which has close quarters and shared spaces. Usually, you share three walls with neighbors unless you have an end unit. Condos do not appreciate in value as quickly as townhouses and single-family houses. Condos are not as easy to sell as houses.
Pros of Buying a House
Land. One of the main reasons people love the idea of having a home is because they currently lack a backyard or front yard or both! Yards are where the fun happens, whether you build a swimming pool or grow a garden. It’s where the dogs can run around to stay fit and it’s where kids can play safely. Even if you don’t use all the space you own, people like to have privacy. The more padding of space you have, the more isolated you and your loved ones will feel. Also, if there is quite a bit of land, you may be able to one day sell extra land for someone to build a house if you need the money.
Freedom. You can do just about anything you want to a house, as long as it’s reasonable. However, with a condo, you don’t own the exterior so you cannot paint it or do much with any of the exterior elements. You can also add additions if your family outgrows the home you bought. Also, you can live with whomever you want, whereas with an HOA, you may have to get tenants approved, even if they are family members. You may also face some restrictions if you try to run a home business in an apartment or condo. You can almost always do it out of a house.
Easier Sell. Because owning a home has more benefits, homes are more desirable and easier to sell. Detached houses tend to be more liquid in a good housing market and a bad one. It also appreciates in value much quicker than other properties.
Insuring a House: Unfortunately, most homeowners pay too much for their coverage, and not because it’s superior to other plans but because their loan officer assigned them a policy so they didn’t shop around. You’re never tied to the home insurance you started with. To compare home insurance rates enter your zip code here.
Cons of Buying a House
If you buy a house, you are responsible for the upkeep of the land as well. You will have to take care of all interior systems yourself. Homes are usually more expensive to buy than condos and townhouses. Homes generally have very high utility bills because they are larger.
Pros of Buying a Townhouse
Privacy. Townhouses are rows of houses that are attached by one wall (brownstones, for example). They are more private than condos but not as much as houses. Townhouse ownership is more like the ownership of a detached single-family house than it is a condo. As with a condo, you will have an HOA fee or joint ownership of common areas. But ownership rights differ from one townhouse to another, however. In most townhomes, you may even be able to own land in the form of a driveway, a front yard or backyard, unlike in a condo. There are also common areas in a townhouse community.
Affordability. Like a condo, a townhouse is usually more affordable than a detached, single-family home. Townhouse HOA fees also tend to be lower than condo HOA fees but you are responsible for more of the upkeep of the property. Townhouses usually appreciate in value faster than condos but not as much as homes.
Size. While condos come in various sizes, townhouses are often larger. Townhouses can be very large and usually feature multiple stories.
Insuring a Townhouse: Most people get confused about what kind of insurance to buy for a townhouse. Do you buy condo insurance or homeowners insurance for a townhouse? The answer is that it depends on whether or not you belong to a condo association. If you do, you’ll need condo insurance. If you don’t you’ll likely want a homeowner's policy. There is no such thing as “townhouse insurance.”
Cons of Buying a Townhouse
Even though townhouses appreciate in value more than condos usually, they do not appreciate as fast as homes. You have limited privacy in a townhome because it shares a wall with a neighbor. If you do own land, it will.
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With all the benefits that come with owning a swimming pool there are also risks, which is why swimming pools are often called “an attractive nuisance.” According to the Centers for Disease Control and Prevention (CDC), approximately 10 people die from unintentional drowning.
Mortgage payments and possibly a homeowners warranty aren’t the only costs of owning a home. Nope, it doesn’t end with taxes and homeowners insurance either. Most people who set out to buy their first home are in for a surprise when the closing date approaches and they learn that they owe all sorts of money for the house they just bought.
Homeowners insurance was not designed to cover small or even big fixes, but to repair damage that is covered under the stipulations of your policy. In fact, you may end up paying more in monthly premiums if you file a claim that gets rejected. For this reason, we advise you to fully review your case and your policy to see if you’re covered before filing a claim.
Homeowners insurance is an important protection to have even when it’s not required for a primary home, a vacation home or condo.