Condo and Townhouse Investment—What are the Pros and Cons?

When it comes to purchasing property, no matter what type of property it is, you always want to make the best possible choice. This is a major purchase, and unlike buying an ugly sweater, if you come to regret it, you cannot simply return it. Here in the Orange County area, many property investors, as well as first-time homebuyers, look to condos and townhomes as an investment. But between the two, ask yourself what are the pros and cons of a condo or townhouse investment before really considering a purchase.

Before you can make your decision, you need to understand what condos and townhomes are.

We often use the term condo—or condominium—to mean a type of building, but that isn’t actually what it is. Instead, condo refers to a type of ownership. With a condo, you own the property that is within the walls of your unit. Sometimes condos are part of a cooperative, which means you then also own a stake in the building and grounds as a whole. In rarer cases, the condo can be classified as fee simple, which means you also own the property outside your unit.

Because it refers to a type of ownership, a condo can be many different types of properties. In most cases, it is an apartment, townhome, or duplex, but it can even refer to a single-family home on occasion. This means that a condo can also be a townhome, and vice-versa.

Townhome refers to a specific type of structure. These are multilevel units, with at least two units per building, having the units laid out side by side rather than stacked on top of each other. In general, with a townhome you also own the property directly outside your unit, having a small entry way, possibly a parking area, and a back yard.

The Right Choice for You

So, rather than asking yourself if you should purchase a condo or townhome, the question is actually a bit more complicated. Should you purchase a townhome or another type of unit in a multi-unit building? And no matter which choice you make, should you opt for a condo or non-condo property?

First, let’s look at the pros and cons of purchasing a townhome versus buying a unit in a multi-unit building.

On the pro side for the townhome would be not having neighbors above or below you, having functional outdoor space, and if purchasing an end unit, only having neighbors on one side. On the con side for the townhome, you have the additional maintenance of the outdoor space and the fact that most townhomes are part of a larger community governed by a homeowner’s association, which can get political. However, many multi-unit buildings have their own associations, so this is not necessarily a plus for other types of units. If you are looking at this property as an investment, more people will be interested in renting townhomes than other types of units.

No matter what type of unit you opt for, you will need to decide if you should go condo or non-condo. In our opinion, it is best to go non-condo. Why? Because it simplifies things. You do not need to deal with the rules and regulations that go with it, or the potential politics that can arise. Plus, potential renters will look more favorably upon units that are not regulated by condo associations.

Return on Investment

Ultimately, if you are looking for the biggest return on investment, then you cannot think about things in terms of townhomes vs other units, condo vs non-condo. Renters will care more about the number of bedrooms and bathrooms and square footage more than anything else. So, as you look at potential properties, never settles for anything less than two-bedroom, two-bathroom units.

Managing Your Property

Once you make your purchase, you will need to manage your investment well to get the best results. A Creative Property Management is happy to help. Once you own your property, we can take over everything else, from vetting renters to improving the property to collecting rent. Just give us a call.