Buying a Townhouse Vs. a Condo in New York City: Which is Better?
When it comes to owning property in New York City in particular, while co-ops are the most ubiquitous form of housing stock available, representing 75% of purchasable homes in Manhattan, condo and townhouse ownership both have next-level cachet.
One reason is that while buying a co-op actually represents share ownership in a corporation composed of multiple co-op owners, condo and townhouse purchases both represent “real property” ownership.
That sounds great, but what does it really mean to own a condo or townhouse—and what are the respective upsides and downsides? Let’s take a rudimentary walk through both.
Why a Condo?
As mentioned, it’s a form of real property instead of shareholder ownership in a co-op.
Interestingly, buying a condo in an apartment complex usually translates to purchasing air rights.
This is indeed also a form of real property, but with condos you are owning a carved out lot of air within the complex.
Both co-ops and condos have boards that oversee buyers’ purchases of units, and the management and maintenance of their buildings.
However, co-ops boards tend to be less stringent in both their vetting of applicants and overall number of rules for building tenants.
This can make the prospect of dealing with a co-op board more attractive than interacting with their (notoriously fickle and unpredictable) co-op counterparts.
Many feel that this also makes condo boards less apt to be adversarial during the application process.
Overall, the more “relaxed” approach of such boards gives condo owners a greater sense of autonomy regarding their individual units and a greater feeling of ownership.
There are, however, some condo boards that ‘act like co-op boards’ and flex their collective muscles—often to keep “undesirable” applicants out, or to counter the actions and decisions of existing owners that a board opposes.
Since the more owner-friendly disposition of most condo boards tends to be checked off as a plus, it’s no surprise that many buyers are leery, and often steer clear, of condos with aggressive boards.
While smaller condo buildings often manage their own day-to-day operations and maintenance, larger complexes typically employ professional management companies instead.
Virtually all condo buildings have common areas and amenities that unit owners co-own and split upkeep costs for.
Building rules and codes primarily apply to such common areas.
Since purchasing a co-op is usually easier than buying a condo (particularly, as mentioned, when it comes to board approval), it also means that selling one tends to be easier, too—with a lot less red tape for both the owner and new buyer.
Condo values also tend to appreciate—which makes for good resale value.
On the Hunt – Purchasing Considerations
The application process is a highlight here as well. As mentioned, the process tends to be less extensive than for a condo. A typical application checklist includes:
- Basic application
- Request for loan application (where applicable)
- A loan commitment letter (where applicable)
- The contract of sale
- Signed forms acknowledging adherence to board rules and bylaws.
To learn more about the buying process, read What You Need to Know Before Your Buy Property and How to Put in a Purchase Offer for an Apartment in New York.
Some condo applications—like those of co-ops—request a reference letter.
Again, it’s left to the individual buyer whether or not to move forward with a co-op board process that seems more difficult than average.
A condo cannot reject an applicant.
Their only recourse is something called “first right of refusal,” cited in the condo bylaws, which lets the condominium purchase the unit in question under the same terms as the buyer who is in contract to purchase the unit.
This option is a costly one for the building, so condo boards almost never exercise it.
Regarding inspecting a unit prior to purchase: condo, like co-op boards, are diligent about overseeing building maintenance, repairs, and improvements.
They also document this in the minutes of board meetings—which are available to prospective unit buyers.
As a result of boards doing such diligent monitoring of building conditions, many buyers feel comfortable foregoing a home inspection.
On the flipside, doing so can make buyers vulnerable to the pretty, shiny facades that may hide shoddy construction work in some new buildings.
Opting to still pay for an independent home inspection can counter buyer’s remorse.
Buying for Yourself vs. a Rental or Investment Property
A condo can also be used as an income-generating property—and rented out.
Find out more about investing in New York City real estate by reading How to Buy an Investment Property in New York.
Most importantly—unlike in a co-op—this can be done without board approval.
However, the purchase price generally for condos tends to be significantly higher than for co-op units, and high-end amenities can also mean high common charges.
Such elevated costs may make renting out the property less feasible and profitable.
However, the fact that building repairs are overseen by the condo board—and any costs split among unit owners as collective—is a plus.
Compare this to townhouses, where an individual owner must absorb the cost of any repairs, solo.
Why a Townhouse?
Townhouses are often seen as the ultimate prize in urban living.
It is a form of real property that not only pertains to the air within the home, but also the lot upon which it stands; unlike a condo where you own air, and share ownership of the lot and common areas with your fellow condo owners.
Most townhouses were constructed between the late 19th and early 20th centuries.
While the overwhelming number of New York townhouses are surrounded by other attached or nearby homes, townhouses still provide more privacy than almost any other type of housing in the city—only beaten, perhaps, by penthouses.
There is also additional space in the form of backyards and back—and in some cases even front—porches.
While condos may represent a step up from co-ops (in terms of minimized meddling from boards), owning a townhouse means jettisoning any board involvement altogether!
This is the ultimate mark of homeowner independence, and not having a board to answer to can help a buyer and seller to expedite closing.
Townhouse Purchasing Considerations
Because townhouses are, on average, larger than condo units, there are a larger number of factors to weigh as well when determining whether to buy an available property:
Not all Townhomes are the Same Size
The width of most townhouses runs between 16 and 20 feet wide.
Homes wider than 18 feet are particularly prized by buyers and real estate agents, and anything larger than 20 feet (a rarity in the city) is labeled a “trophy” townhouse or “mansion.”
The number of units deems how a home is classified: For instance, two units comprise a two-family home, three units a three-family, and so forth. Up to four family units is considered residential.
However, looks can be deceiving.
What appears to be a multiple-family dwelling may, by law, actually be a single-family dwelling—which can potentially spell trouble if not detected by the buyer prior to seeking financing or insurance.
That’s why the Department of Buildings (DOB) is one of the first places a prospective buyer needs to visit when doing due diligence on an available townhouse.
How You Can Research Issues with a Property
DOB research can help ascertain if that home obtained a formal Certificate of Occupancy (CO) to be broken into multiple units.
Conversely, changing a multi-unit home back into a single-occupancy one will also require a change to the CO.
(Side note: Converting a multi-unit home back to single occupancy can be costly, bureaucratic, and time consuming, so make sure you have both the money and the stamina needed for such an undertaking.)
The DOB is also where to research any code and zoning violations on record for that home.
Likewise, it’s the department to go to for documentation on any construction permits for that property—as well as where you’d go to obtain a new construction permit.
Equally important, it’s where you’d find out if there are any liens or judgments on the home or any property-tax delinquencies.
All these factors can potentially impact your ability to get financing.
Home Inspection: Pay Now—or Pay Later
As mentioned earlier in this piece, some eschew getting an independent, certified inspector for a condo unit (since condo boards maintain a vigilant eye on building and individual unit conditions, and they also keep records).
However, skipping home inspection for a townhouse wouldn’t be wise.
Specifically, inspectors can look for issues such as: soundness of construction, mold, leaks, issues with pipes, electrical wiring, and boilers, as well as problems with the roofing and exterior of the home—to name a few.
The home inspection should be critical step, and not only help you identify potential pitfalls and expenses, but also help you negotiate your deal.
Location: A Panoramic View
When considering a townhouse, examine the same factors one would in any real-estate-hunting scenario (including for rentals): things like proximity to public transportation and projected commute to work.
In addition, consider the condition of both houses directly on that block and ones behind the home you’re evaluating.
Blocks that have schools, firehouses, police departments, or restaurants and bars need to be looked at in terms of noise potential and volume of pedestrians and vehicles.
An old real estate trick is not only to visit a prospective home in the daytime, but to return independently at least once in the evening and/or on weekends to see if there’s any shift in the amount of noise or quality of life in the immediate area.
In addition, savvy homebuyers are future facing: Are there new neighborhood developments or amenities planned?
Also, consider if these impending changes will be beneficial (e.g., by potentially driving up property values) or not (e.g., too much traffic)?
Why Party Walls are Important to Townhouses
Here’s an issue that individual co-op and condo buyers (almost) never have to consider: “party walls.”
These are any walls that two adjoining buildings share. Since it’s a structural wall used by both buildings, it’s overseen by what’s known as a “party wall agreement.”
The agreement outlines what kinds of changes or alterations both parties can make to the wall, and who is responsible for maintenance.
Party walls also need to be examined prior to purchasing a home, in order to make sure they’re well maintained and structurally sound.
Counsel from a real estate attorney is essential to understanding and sagely navigating this, and many of the matters touched upon in this section.
Buying for Yourself vs. Rental Property
The housing stock for townhouses is far more limited than for condos and co-ops, so it can often become a seller’s market.
But once you’ve secured and nestled into a townhouse of your own, here are two boons: House owners are free from costly common charges most condo owners are billed; also, interestingly, real estate taxes for townhouses tend to be lower as well.
What are the Cons of Owning a Townhouse?
However, the sense of independence townhouse property owners relish when things are operating smoothly can also bring a sense of dread when things are not.
Property Expenses are Your Sole Responsibility
As previously mentioned, the lack of a managing agent means that the property owner is fully responsible for the cost of all maintenance and repairs.
And while property taxes may be lower for townhouses, as a unit owner in a condo building the managing agent will outsource monitoring and disputing property taxes (on behalf of all unit owners) to a law firm that specializes in tax certiorari.
As a townhouse owner—again—you’re on your own to hire legal help.
Dealing with Tenants Can be Stressful and Costly
Lastly, regarding potential rental income via tenants: The least expensive townhouses are ones that have rent-controlled or rent-stabilized tenants in them.
However, with such tenants, recouping your overall investment becomes a different story, because clearly you won’t be able to benefit from receiving market rates.
Whether it’s a quest for higher rent or to transform a townhouse back to a single-unit dwelling, trying to vacate tenants who pay mandated below-market rates can not only be expensive and time consuming, but also illegal if not handled properly or ethically.
Maintaining rent-controlled or -stabilized tenants also comes with the potential par-for-the course expenses that come with being a landlord, such as collection and eviction fees.
Whether you purchase a condo or a townhouse, being a property owner has many advantages and rewards, but there are many caveats as well.
It's important to lay the groundwork and have experienced professionals working on your side you can make the best decision.
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