High End Condo

What’s The Difference Between A Condo, Townhouse And Apartment?

Dan Rafter6-minute read
February 01, 2022

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You’re ready to move, but you’re not in the market for a stand-alone single-family home. Instead, you’re debating between renting an apartment or buying a condo or townhouse. That leads to the big question: What’s the difference between these three property types?

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What Is A Condo Home?

The main difference between these types of homes? It’s all about ownership.

You can buy condominium units or townhouses. And when you do, you own at least part of those properties.

With a condo, you own the interior of your unit. You are responsible for maintaining and for fixing anything inside it that breaks.

The homeowners association that governs your condo building – the association you are part of and pay monthly dues to – owns and is responsible for the exterior of the condo building and its common areas. It is also responsible for hiring the professionals who will mow your building’s lawn, rake the leaves, shovel the snow and clean the entryways and common areas.

What Is A Townhouse?

A townhouse is similar to a condo, but more closely resembles a single-family home. Usually, several townhouses are connected, like row houses, to form a single community. You’ll usually share at least one wall with a neighbor.

When you buy a townhouse, you own your house’s interior and exterior, including its front and back yards. You don’t, though, own any of the townhouse community’s common areas. Those are owned by the homeowners association.

With both a townhouse and condominium, you’ll usually take out a mortgage loan that you pay back in monthly installments, with property taxes, homeowners insurance and interest added on. You can skip this, of course, if you pay for your condo or townhouse in cash. You’ll also pay a monthly fee to your homeowners association.

What Is An Apartment?

Apartment living involves rent. You won’t own your apartment unit, you’ll pay rent each month to a landlord. You won’t, then, take out a mortgage loan or pay homeowners association fees. You’ll sign a lease before moving into your apartment stating what your monthly rent is. Your lease can last for a short period of time or a longer one, but will usually remain in place for a year. After the lease expires, you’ll have the option to renew, perhaps at a slightly higher monthly rent.

You won’t be responsible for fixing anything that breaks inside your apartment or in its common areas. You also won’t be responsible for mowing the lawn, shoveling the snow or cleaning your apartment complex’s common areas.

What Is Better, A Condo Or An Apartment?

When you’re ready to move, then, should you rent an apartment or buy a condo or townhouse?

Not surprisingly, there’s not one right answer. It all depends on your needs.

"Usually, it is better to rent an apartment when you only plan to be in the area for a short period of time or are concerned about maintenance costs," said Ben Mizes, a real estate agent and chief executive officer of St. Louis-based real estate firm Clever. "When you're thinking more long-term, buying a condo is a great way to build equity."

There are several benefits to owning a condo or townhouse. First, you’ll build equity in your home. Equity is the difference between what you owe on your mortgage and what your home is currently worth. If your condo or townhouse is worth $200,000 and you owe $120,000 on your mortgage, you have $80,000 of equity.

You can access that money in the form of home equity loans or home equity lines of credit. You can take the money from these products – which you will have to pay back, with interest – to fund anything you’d like, from paying off high interest-rate credit cards to covering a portion of your children’s college education to funding a major home-improvement project.

You might also make a solid profit when it’s time to sell your townhouse or condo. Say you bought a condo for $150,000. When you sell it 10 years later, its value has increased. You might sell the building for $220,000. If you only owe $100,000 on your mortgage, that’s a difference of $120,000. Keep in mind, though, that you will have to pay fees to your real estate agent and other third-party providers that will eat into your profits. Your home’s value is also not guaranteed to increase.

It’s easier to budget, too, when you own. If you take out a fixed rate mortgage loan, you’ll generally know what your monthly payment will be each month. If you rent, though, your landlord can always increase your rent once your lease is up.

Owning also comes with tax benefits. You can deduct the amount of interest you pay each year on your mortgage loan. Remember, though, that you can only do this if you itemize your taxes, not if you take the standard deduction.

Finally, you have more freedom to transform your home when you own it. You can paint your walls whatever colors you’d like, add bathrooms or create a luxurious outdoor garden. Your property is yours, and you’re free to do with it what you like.

Andres Piedra, principal broker with Dulles, Virginia-based Veterans Realty Group, said that the time you plan on staying in an area is the key factor when debating between buying a condo/townhouse or renting an apartment.

Piedra says that if you plan on staying in an area longer than two years, you should buy, not rent.

"Hands down," Piedra said. "With two years under their belt after purchasing, the homeowners are already likely building equity in their homes. If they have to depart after two years and sell the property, any gains they have realized in value on the property become tax-free gains. That is a huge win."

A downside to owning a condo or townhouse? Those homeowners association fees. You’ll have to budget for the additional monthly payment you’ll make to your community’s association.

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The Benefits Of Renting An Apartment

This doesn’t mean that owning is always a better choice. Renting an apartment comes with its own benefits. The top one? Flexibility. Say you only plan to live in an area for a year or two. When you’re renting an apartment, it’s easy to move on. If you own a condo or townhouse, you have to worry about selling that property.

When you rent an apartment, you don’t have to take care of maintenance. If something breaks in your apartment, you call your landlord to get it fixed. You don’t have to worry, either, about raking leaves, pulling weeds or cutting the lawn; there’s someone else to do that for you.

And if you want to live in the middle of a big city? Renting an apartment is often the easiest way to find a home in the center of all the action. Many new apartments are at the heart of big cities, close to public transportation, restaurants, retailers and night life.

Amy Freedman, an associate at UpFlip, a Cleveland-based real estate agency, said that your job situation could help you determine if renting makes more sense than buying.

"If you're more of an employee who runs the risk of being transferred frequently, then renting an apartment might be your best bet," Freedman said. "If you feel you won't be living in an area for up to six or seven years, then there's absolutely little to no reason for purchasing a condo."

What Is A condominium Apartment?

Interested in a condominium apartment? Well, that’s unfortunate, because there’s really no such thing. However, you might be able to rent a condominium unit in much the same way you can rent an apartment. You might even be able to rent a townhouse. The owners of these properties often use them as rentals, turning them into a way to make extra money each month. When you rent a condo or townhouse, the property’s owner will be your landlord. You’ll pay rent each month to these owners. You won’t, though, pay for homeowners association fees. The owners of your unit or townhouse will continue to make those payments.

Can You Own An Apartment?

It’s not technically possible to own an apartment. You rent apartments. However, there might be some apartment buildings in your city in which you can buy a unit. Technically, though, this unit would then be considered a condominium because you are buying and not renting it.

If you do buy a unit in an apartment building, you’d basically be living the condominium life. You’d be responsible for maintaining the interior of your unit while the landlord of the building would be responsible for the exterior and its common areas. If you took out a mortgage to buy the unit, you’d need to make a mortgage payment each month. Depending on your arrangement with the building’s landlord or owner, you might or might not have to pay a homeowners association fee. Be sure to check out our other resource on home buying and personal finance. 

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Dan Rafter

Dan Rafter has been writing about personal finance for more than 15 years. He's written for publications ranging from the Chicago Tribune and Washington Post to Wise Bread, RocketMortgage.com and RocketHQ.com.