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.

Read on: What's the Difference Between a Co-op and a Condo in NYC?

One reason is that while buying a co-op represents share ownership in a corporation composed of multiple co-op owners, condo and townhouse purchases represent "real property" ownership.

That sounds great, but what does it mean to own a condo or townhouse—and what are the respective upsides and downsides? Let's take a rudimentary walk through both.

Condominiums

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 also a form of real property, but with condos, you own 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-op boards tend to be less stringent in vetting applicants and an overall number of rules for building tenants.

This can make dealing with a co-op board more attractive than interacting with their (notoriously fickle and unpredictable) co-op counterparts.

Many feel this makes condo boards less apt to be adversarial during the application process.

Overall, such boards' more "relaxed" approach gives condo owners greater autonomy regarding their units and a more incredible feeling of ownership.

However, some condo boards 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 cautious and often steer clear of condos with aggressive boards.

While smaller condo buildings often manage their 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 (mainly, as mentioned, when it comes to board approval), it also means that selling one tends to be more accessible, 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 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 You 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 complicated than average.

A condo cannot reject an applicant.

Their only recourse is "first right of refusal," cited in the condo bylaws, which lets the condominium purchase the unit under the same terms as the buyer in the contract to buy the team.

This option is costly for the building, so condo boards rarely exercise it.

Regarding inspecting a unit before purchase, condos, 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' diligent monitoring of building conditions, many buyers feel comfortable preceding a home inspection.

Conversely, 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.

Learn 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 for condos tends to be significantly higher than for co-op units, and high-end amenities can also mean high standard charges.

Such elevated costs may make renting out the property less feasible and profitable.

However, the fact that the condo board oversees building repairs—and any costs split among unit owners collectively—is a plus.

Compare this to townhouses, where an individual owner must absorb the cost of any repairs solo.

Townhouses

Why a Townhouse?

Townhouses are often seen as the ultimate prize in urban living.

It is a form of real property that pertains not only to the air within the home but also to 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 sometimes 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 expedite closing.

Townhouse Purchasing Considerations

Because townhouses are, on average, more significant than condo units, there are a more substantial 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.

Buyers and real estate agents particularly prize homes wider than 18 feet, and anything more significant than 20 feet (a rarity in the city) are labeled a "trophy" townhouse or "mansion."

The number of units determines how a home is classified: For instance, two teams comprise a two-family house, three units a three-family, and so forth. Up to four family units are considered residential.

However, looks can be deceiving.

What appears to be a multiple-family dwelling may, by law, be a single-family dwelling—which can potentially spell trouble if not detected by the buyer before 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 into a single-occupancy one will also require changing 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 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 and where you'd go to obtain a new construction permit.

Equally important, it's where you'd find out if there are any liens, judgments on the home, or 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 the building and individual unit conditions and keep records).

However, skipping a home inspection for a townhouse wouldn't be wise.

Specifically, inspectors can look for issues such as soundness of construction, mold, leaks, 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 a critical step, helping you identify potential pitfalls and expenses and also help you negotiate your deal.

Location: A Panoramic View

When considering a townhouse, examine the same factors in any real-estate-hunting scenario (including for rentals): proximity to public transportation and projected commute to work.

In addition, consider the condition of both houses directly on that block and the ones behind the home you're evaluating.

Blocks that have schools, firehouses, police departments, or restaurants and bars need to be looked at regarding noise potential and the volume of pedestrians and vehicles.

An old real estate trick is to visit a prospective home in the daytime and return independently at least once in the evening and 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 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

An issue that individual co-op and condo buyers (almost) never have to consider is "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 changes or alterations both parties can make to the wall and who is responsible for maintenance.

Party walls must also be examined before purchasing a home to ensure they're well-maintained and structurally sound.

Counsel from a real estate attorney is essential to understanding and navigating this and many of the matters in this section.

Buying for Yourself vs. Rental Property

The housing stock for townhouses is far more limited than 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 standard charges most condo owners are billed; interestingly, townhouse real estate taxes tend to be lower.

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 the property owner is fully responsible for all maintenance and repair costs.

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 specializing in tax certification.

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 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 be expensive, time-consuming, and illegal if not handled properly or ethically.

Maintaining rent-controlled or -stabilized tenants also comes with the potential par-for-the-course expenses of 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 also many caveats.

It's vital to lay the groundwork and have experienced professionals working on your side so you can make the best decision.

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