First Time Home Buyer: Condo or Townhouse?

If you’re a first time home buyer, you may want to consider a couple alternatives to the traditional, single-family home that is surrounded on all sides by its own expensive lawn or driveway. Many people start their property buying progression with a condominium or townhouse, but which is right for you?

An increasing number of families are turning to these shared-wall options, mainly to stretch their budgets and cut down on outdoor maintenance. According to the Community Associations Institute, in 2006 57 million Americans were living in 23.1 million units in 286,000 association-governed communities nationwide, up from just 2.1 million in 10,000 communities in 1970.

The biggest advantage of both condos and townhouses is price. Sure, there are plenty of luxury high-rises and high end townhomes. But you can save a lot of money by not buying a big yard.

You’ll get more living space for your money, but you may be surprised to learn that your maintenance fee for both condos and townhomes counts toward your monthly housing expense. That’s not true with all your expenses that go into a single-family home—basically because you can skimp on expenses if you’re going it alone, but you can’t cry poor to the condo association. So you may be allowed a smaller loan.

A big selling point on both is that you don’t have to take care of a big yard. Your association handles most things outside your home. In a condo you may own a portion of the common space. In a townhouse, you’ll own your small yard, but you may or may not have to manage it.

The downside to either option is that you’ll have to live under the rules of the association. They may be anti-dog or have rules about landscaping or renting out. Harsh restrictions may make it harder to live there and more difficult to resell one day. Alternatively, if the renting rules are lax, you may find yourself not living among your fellow owners, who you’d like to think would be more responsive and responsible. Still community living has its benefits, such as amenities likes a pool or gym that you couldn’t afford on your own.

The advantage of a townhome over a condo is that you are living more independently. You’ll have a little bit of yard. You will enter through your own front door. You can probably grill out back. You may only share one wall with your neighbors—not the many walls, hallways, floors and ceilings that can create strife and noise complaints in a condo. And you may have your own parking space or garage—not a free-for-all parking lot.

The other advantage is that for financial purposes, a townhouse is still considered a single family home—even though there may be other single family homes pressed up against it, says Jeff Belonger, a loan officer at National Future Mortgage.

“There are a lot more issues with condos,” Belonger says. If more than half of the owners don’t live there—and are using it just as an investment they rent out—it will be harder to get certain loans.

Condominiums have traditionally been considered not as sound of an investment as a house—basically because they catered to a limited slice of the potential market. But as more people consider condos, that may be changing.

Some people choose a condo, however, because it offers complete liberation from outdoor work. Condos do tend to offer more attractive locations. In some neighborhoods in a city or a suburban downtown, condos may be all you can find. These high rise buildings tend to be in more urban settings, potentially near transportation (such as a commuter train), food and entertainment. They may offer a spectacular view that you just can’t get on the ground floor.

(Co-operative apartments are another story. In the co-op ownership structure, you technically own not your apartment, but a share of the co-operative that owns the building.)

Ultimately, it’s mostly a lifestyle choice: would you rather live in an apartment or a house? How close do you want to be to your neighbors? Both condos and townhouses force a little bit of community living on you, but townhouses offer a little more independence and condos offer more citified living.