Complex of townhouses.

Duplex Vs. Townhouse: Which Is Right For You?

7-Minute Read
Published on October 14, 2020
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Buying a home is often the largest investment a person will make. For some buyers, the allure of a detached single-family home pales in comparison to the economic sense of attached homes – and for good reason. What duplexes and townhouses have in common are that they’re both distinct, private-entrance units that share a common wall or floor with another dwelling.

Both are excellent options for first-time home buyers who aren’t quite financially prepared for a larger detached home but who are ready to make their first real estate investment.

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What Are The Differences Between A Duplex And A Townhouse?

There are some key differences between a duplex and a townhouse. A duplex is a single structure with a single owner, featuring two residences (either side by side or upstairs and downstairs) with private entrances. A townhouse, on the other hand, features several dwellings that share walls and each unit is individually owned. Townhouses are easy to spot because they are architecturally similar and usually line the streets in a neat row.

Of course, it’s important to understand the nuances of both types of home to determine which is compatible with your lifestyle. Here are some key differences:

Rental Income

Buying a duplex allows you to purchase not one, but two, units in one sweep, meaning you can rent out one unit to help pay for your occupation in the other – and you can pay off your mortgage faster by leveraging that rental income. When applying for a multifamily home mortgage, you can leverage the anticipated future rental income based on the estimated market rent. Townhouses, on the other hand, are single-occupancy units, so unless you’re purchasing a townhouse exclusively to rent it out, you won’t benefit from a renter’s monthly payments.

Privacy

Needless to say, attached homes don’t offer the same level of privacy as detached family homes. True to its namesake, an attached home shares structural elements with a neighbor. With occupants on the other side of the wall, ensuring the units are soundproof may be the key to maintaining neighborly relationships.

Most townhouses share two walls with a neighbor on either side, whereas duplex residents typically only share only a single wall or floor/ceiling with one neighbor. That said, townhouse owners often have their own private yard, while duplex dwellers often share their outdoor space.

In the lease agreement, duplex owners should clarify all rules and expectations around shared driveways, yards and ambient noise in order to help mitigate conflict.

Maintenance And Homeowner Association Fees

With both townhouses and duplexes, you would be responsible for property maintenance. In a duplex, that includes fulfilling landlord duties for your tenants and maintaining shared outdoor spaces. Townhouses, which are often found in developed communities, typically require payment of monthly homeowner’s association (HOA) fees, which can range from the hundreds to the thousands of dollars, depending on the area. These fees can cover a range of services including:

  • City services: Many of your basic utilities (e.g., trash collection, water, sewage) are often included in your monthly fees, leaving you fewer bills to keep track of and more time to enjoy your home.
  • Community amenities: Does your townhouse community have a pool and fitness center you can’t wait to use? Your HOA fee will cover maintenance costs for community infrastructure, as well as the salaries for any valet services, security guards or other services.
  • Reserve funds: It’s important to read the HOA rules closely for special assessments. If the HOA doesn’t have enough of a reserve to cover an emergency cost, such as a faulty plumbing system in the community clubhouse, the board may vote to charge a special assessment, which can run in the thousands of dollars. Many rules will include restrictions on the amount or number of times a special assessment can be charged in a year.

That said, townhouse HOAs are typically far less expensive and restrictive than those associated with condos. Whereas townhouse owners are responsible for the entire exterior of their property, a condo community’s HOA or a management company is responsible for maintaining lawn care and other exterior maintenance. Each HOA’s rules and regulations vary widely, so be sure to read the fine print thoroughly before signing.

What Are The Pros and Cons of Duplex Living?

Let’s weigh the advantages and disadvantages of buying a duplex.

Pros

Location, location, location. If your reason for buying a home is to move to a more desirable neighborhood or better school district, purchasing a duplex can be the most affordable way to become a property owner. Additionally, diversifying your income with a reliable stream of rent payments can be a worthwhile long-term investment.

Although the upfront costs of investing in a duplex may be higher than purchasing a townhome, in many cases, the return on investment (ROI) can be felt immediately because rental income can help you pay off your mortgage faster.

Another benefit of investing in a duplex comes in the midst of the COVID-19 pandemic and the recession, which has forced 39% of younger millennials to move back home. Whether you purchase a duplex and rent both units out to family members or choose to live in one unit and rent the other to a child or older parent, a duplex could be a smart investment for you and your extended family.

Cons

If you choose to purchase a duplex, the landlord responsibilities will likely be the biggest lifestyle change. Becoming a first-time home owner and landlord in one fell swoop is a significant undertaking: You must make yourself available to make repairs as needed, follow local laws that regulate safe dwelling units, market the property to ensure occupancy and more.

Additionally, privacy might be a bigger concern with a duplex than in a townhome because you often have to share the outdoor space. The best way to circumvent privacy issues is to have tough conversations with prospective renters. Given social distancing guidelines (which may be with us for a long time), what are your expectations around social gatherings in any shared spaces? What quiet hours work for your work schedule? Be sure to vet the compatibility of your neighbor before entering a legal agreement.

What Are The Pros and Cons of Townhouse Living?

Let’s weigh the advantages and disadvantages of buying a townhouse.

Pros

Unlike with duplexes, when you buy a townhouse, what you purchase is yours to enjoy, including the outdoor space. Living in a townhouse has many of the benefits of detached family home living, albeit with less to clean and maintain. Although you’re not signing up to take on the job of a landlord when you buy a townhouse, having full ownership of your unit will make it easier for you to rent out your home if your HOA and lender allow it. You also have your own yard space.

Cons

In a 2020 Homeowner Satisfaction Survey, most residents rated their overall community experience as “positive” or, at worst, “neutral.” Although HOAs make it easy to pay utilities and enjoy community amenities, some people may not like the idea of being governed by one.

Be sure to take a step back and consider what’s important to you. If flexibility is nonnegotiable, make sure your HOA agreement allows for renters. It’s important to research how easily the HOA can change the rules. Additionally, there are many mortgage and tax implications when converting your primary residence into a rental, so contact your lender and be sure to work with a certified public accountant to ensure a smooth transition.

In a duplex, it’s clear who is responsible for maintenance costs (it’s you), because you own the building. Because townhouses share walls in an expansive structure, you may need to negotiate repair costs and lifestyle changes with neighbors. For example, it can be tricky to ask a neighbor to use less cooking grease because your shared pipe keeps getting clogged.

Ready To Take The Next Step?

Now that you have more information about townhouses and duplexes, you should have a better idea of which property type is most compatible with your lifestyle and financial goals. Your next step is to find out what you can afford using our mortgage calculator.

Ready to apply? Get started online or give us a call at (833) 230-4553.

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Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

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