Townhouses and duplexes are both popular home styles, but each offers its own benefits
When searching for a new home, you may come across townhouses and duplexes. From the outside, they may appear to be the same, but each has its own unique pros and cons.
Townhouses are great for buyers looking for the single-family lifestyle on a lower maintenance property, while duplexes are typically for buyers who want a residence and an investment opportunity. Below, we’ve outlined more info on each so you can make the decision that’s right for your family.
The Benefits of Both Townhouses and Duplexes
Townhouses and duplexes are both excellent first-time home buyer investments, especially if you want to live in a pricier neighborhood but don’t want the mortgage or the maintenance of a single-family residence.
Structurally, townhouses and duplexes both have private entrances that share a common wall or floor with another dwelling. Both usually share the same layout: a living room, kitchen, dining room, and bathroom. Some may also have a primary bedroom with an attached bathroom, as well as additional bedrooms and bathrooms.
Townhouses usually have private yards or patios, while duplexes often share front and back yards. Some upper-lower-style duplexes may have private balconies or decks, depending on the floorplan of the entire unit. Both townhouses and duplexes also often have separate single or two-car garages.
What is a Townhouse?
Also called “row houses,” townhouses are two- or three-story building homes attached by one or more walls on either side. Think of the clean, classic lines of townhouse communities in San Francisco, Washington DC, or New York City, with its iconic Brownstone townhouses. In these cities, where real estate tends to be pricey, townhouses offer more space and privacy than apartments but have less cost and maintenance than single-family residences. A townhome differs from a patio home because it contains at least two stories.
If you buy a townhouse that is flanked by neighbors on either side, you’ll pay less than for one that's on the end. The latter are considered premium lots because they only share one wall and likely have more yard space.
PROS: Townhouse owners not only own their home, but typically also own the land the structure stands on and any front, back, or side yard that comes with it. Townhouse owners that own inner units and share common walls on both sides spend less time on yard maintenance because those spaces tend to be smaller.
With townhouses, a Homeowners Association, or HOA, will determine building and community property maintenance costs. An HOA is a group that makes decisions for the betterment of its members, who are homeowners in the same area. Many townhouse owners enjoy the defined rules of an HOA covenant because it gives them peace of mind that all of the residents are on the same page about responsibilities and expectations.
The HOA provides rules for its membership community on maintaining common spaces like community pools, fitness centers, playgrounds, walking trails, pet exercise areas, or boat docks. Naturally, HOAs have monthly or annual fees for these premium protections and services that many townhouse owners enjoy. Sometimes visual exterior maintenance tasks like gutter cleaning and siding repair or replacement are even covered by membership dues.
Every HOA has a unique set of CCRs (covenants, conditions, and restrictions) that outlines the HOA’s obligation, as well as those of the homeowner. In the unfortunate event of neighbor disputes like disruptive gatherings, unruly pets, or other infractions of the CCRs, HOAs can mediate between parties for a resolution.
CONS: Because townhouses share common walls, privacy and noise can be drawbacks, especially if your neighbors have pets, musical instruments, or have other loud habits. If it matters to you and your family, try to meet the neighbors before you sign on the dotted line.
Although townhouses often attract the same lower mortgage loan rates as single-family homes, depending on their location, they may not appreciate in value at the same rate, even in the same neighborhood.
HOAs can be a positive and a negative to some potential townhouse owners. Closely read and research the CCRs to understand exactly what is included in the fee structure, when, what, and how those fees might change, and what arbitration would look like if issues arise. Pay attention to clauses about “special assessments,” which means the HOA can charge for sudden expenses like damage to common areas.
The HOA CCRs can make or break a homeowner’s decision to buy a particular townhouse. Avoid buying a townhouse in any community that feels overly restrictive or punitive. Breaking the rules can come with stiff penalties, fines, or even legal action.
What is a Duplex?
Duplexes are popular because they are often single-level, consisting of one communal wall shared by two separate residences. But they can also be an “upstairs/downstairs” configuration that shares a mutual floor or ceiling. From the street, sometimes duplexes look like separate single-family homes if you don’t look carefully.
PROS: Ever heard of “house hacking?” It means that a duplex owner buys one duplex, but owns two homes. House hacking has its advantages because you can live in one unit and rent the other, allowing you to diversify your income and leverage the rental income to pay off the mortgage faster. Duplexes are great for first-time property investors who want to generate wealth and build equity as an investor. It’s all the benefits of homeownership and property management literally under one roof.
Mortgage companies are most likely to offer better rates to duplex owners if the owner is residing in one of the units. Ask your lender if you can include potential rental income during the qualification process. This is where your real estate agent comes in. They can provide comparisons, “comps” of the income generated for the property. Additionally, property taxes are based on one total unit instead of two separate units, which can make for huge additional savings.
If you’re looking to live with family, duplexes are a great option. Multi-generational living is trending high because it’s a great way to have family members close by for child or elder care and to spend even more time with the people you love. Duplexes give family members independence and privacy while also potentially giving you the benefits of the rental income and maybe even a built-in babysitter.
CONS: Becoming a first-time homeowner and landlord at the same time can be stressful; educate yourself on the laws for maintaining safe dwelling units. Keep the name and number of a local handyperson for repairs that are out of your comfort zone or when you are unavailable.
Most duplexes on the market come from properties that may be decades old and might require additional costs in inspections or upgrades before they can be an appealing space to rent out to others. But if you want to learn the basics of home improvement, remodeling or being a landlord, a duplex is worth considering.
Renting out the next-door unit can be tricky, too, since you’ll be sharing outdoor spaces like front and back yards. Evicting a tenant who lives next door can be awkward or downright problematic. Take the time to properly vet tenants and if you are new to the landlord life, hire a legal professional to draft a rental agreement that’s specific to your property and your needs. The extra time and effort could save you thousands in potential court costs.