What is a Townhouse?

Also known as a townhome, a townhouse is a type of real estate that has multiple floors and shares at least two of its walls with other residences, according to Rocket Mortgage. These homes are typically tall and thin, and you’ll often see them attached to other townhomes in a long row.

Townhouses are usually individually owned, feature their own entrance(s), and may include outdoor space. This type of property is often found in high-density, urban environments. However, the popularity of townhouses has spread to the outskirts of cities and suburban areas.

Per an analysis from the National Association of Home Builders, the number of new-build townhouses increased by over 28% from 2020 to 2021.

What’s the Difference Between a Townhouse vs. a Condo?

Bankrate explains that a townhouse is a style of residence, so its ownership structure can take several forms. A townhouse “can be a condo if it’s part of a condominium community with the associated rights or planned-unit development (PUD).”

Both townhouses and condos can be single-family or multifamily properties. When they’re multifamily properties, the individual floors are broken into separate units and rented out.

Pros and Cons of Buying a Townhouse as a Landlord

Renting out a townhouse can unlock a new revenue stream, but landlords should be aware of the potential drawbacks as well.

Pros

As Bankrate notes, there are four major benefits to owning a townhouse:

• Lower cost. Townhouses tend to be less expensive than detached single-family homes.
• Less maintenance. Given that townhouses often have smaller yard space, expect fewer exterior maintenance tasks.

• Amenities. If your townhome is part of a development, your tenants may have access to shared facilities like a pool, gym, or clubhouse.

• Outdoor space. “Compared to apartments, townhouses often come with access to a small amount of private outdoor space (a patio or lawn) and possibly a private garage,” Bankrate says.

Cons

Bankrate highlights three common drawbacks of owning a townhouse:

• Homeowners Association (HOA) presence. If your townhouse is part of a development, it’s likely you’ll be forced to enroll in their Homeowners Association group, which means an extra monthly fee and specific rules regarding the property.
• Noise pollution. Your tenants will share at least one wall with their neighbors, which can mean more noise than they’d experience in a detached single-family home.
• Multifloor living. Since townhouses are typically more than one story tall and elevators are expensive, it’s likely that your townhouse will have stairs.