There are many different types of rental properties from which real estate investors can choose. Deciding which is the best rental property for you is one key to making money in real estate. One classic rental property choice is common for rental property investors. That is a townhouse vs. duplex. Let’s compare and contrast the two to see which is suitable for your next acquisition. Before we begin, let us define exactly what is a townhouse vs. duplex.
Structure and Design
A townhouse is a single unit that is connected to a row of other identical but independent houses. Townhouses on the street typically have a similar aesthetic that results in uniformity. Hence the term “row houses” is sometimes used to describe them. In many cases, townhouses occur in small lot areas and are multi-level with two to three stories.
On the other hand, a duplex may seem like a typical single-detached house at first glance, but when you take a closer look, you will notice that there are separate entrances on either side of the structure. This is because a duplex structure comprises two separate units, each with its kitchen, bedrooms, bathrooms, and general living spaces. Duplexes are commonly two stories high.
Another notable distinction between a townhouse and a duplex is ownership. With a townhouse, the occupant of the unit also owns the exterior of the home and the land on which the property sits.
On the other hand, a duplex is occupied by two different residents, but only one owns the property and the land on which it is located. The other unit is usually rented out to another occupant to allow the owner to earn an extra income.
As previously mentioned, each townhouse is occupied by a single-family, whereas two different families occupy each unit in a duplex.
With both duplexes and townhouses, you will share at least one wall with an adjacent unit. However, with a townhouse, several units are close to proximity to one another due to the row design of the units, so that if your home is in the midst of a townhouse community, you are flanked by other units on both sides. As for a duplex, you only a wall with your immediate neighbour whose unit is adjacent to yours. In both cases, it is essential to go for soundproof units to avoid having the noise from your neighbours unit filtering into your and disturbing your peace and quiet.
Presence of an HOA
On the other hand, duplexes are less likely to be governed by an HOA. The owner/landlord usually comes up with the rules and regulations that he/she expects the tenant to follow. These stipulations are typically indicated on the lease so that by signing the agreement, the tenant accepts liability if the rules are disregarded.
Besides private spaces such as driveways and backyards, townhouses may also have communal areas such as a swimming pool, a small playground, or a park. This is especially true in more significant neighbourhoods with more rows of houses. On the other hand, duplex living means having to get used to sharing a yard and a driveway with your immediate neighbour. While amenities such as in-unit laundries are private, most outdoor spaces are shared between the adjacent units.
Location is an essential factor when it comes to determining the cost of both townhouses and duplexes. Other factors that may influence both units’ value include size, property taxes, and amenities. In terms of the purchase price, duplexes may be more expensive than townhouses since you are essentially buying two units in one, which automatically means square footage to pay for. However, it is not unheard of to find townhouses that are bigger than some duplexes, so this may not always apply.
Duplexes have the edge over townhouses when it comes to investment value. With a duplex, repair, maintenance, and your rental schedule are entirely in your control, assuming you own both halves. With a townhouse, since an HOA is in control of several aspects of your unit, you have no choice but to conform to others’ wants and needs. For example, the HOA may have a no-pets rule for all the townhouses in the community. This will have a negative impact on your available tenant list and probably your rental income as well.
Having compared and contrasted townhouses and duplexes, it is also essential to consider the positive and negative aspects of both unit types.
Townhouse vs. Duplex: Costs & Budgeting
One reason that townhomes are very popular is that they are similar to other condominiums in that townhomes are more cost-effective since they have shared walls and may also have shared common areas. These have inherent advantages vs. single-family homes. However, unlike owning an apartment or condo unit in a building, townhomes also have individual maintenance requirements. For example, you may be responsible for your roof. Here, the ease of having the “condo association” take care of all the maintenance of the exterior is lost. Townhomes are a compromise when it comes to costs.
In most duplex investment properties, you are the sole owner. That means that you will not have a condo association to help you with maintenance. However, you will benefit from having two units and one rental property to maintain. Your building and landscaping costs will be lower per unit compared to two single-family rental units. You will also have one vendor list for two units. You should expect to find that property taxes will be lower per unit than they would be compared to two single-family homes of equal square footage. There are many advantages to duplex units when it comes to costs.
Townhouse vs. Duplex: Flexibility and Control
When you compare the flexibility and control of a townhouse vs. duplex, the duplex will always emerge ahead. Maintenance, repairs, and your rental schedule will all be in your sole control with a duplex assuming you own both halves. With a condo association in control of your townhouse’s many aspects, you will need to bow to others’ needs and wants. With a duplex, you control the vendor list, and you control the rental demand in ways you disagree with a townhouse rental property. For example, the townhouse may have a no-pets rule. That slashes your available tenant list and possibly also your rental income.
When evaluating the best type of investment property– a townhouse vs. a duplex- begin doing your homework. Mashvisor can help you with determining which is the best multi-family property. Ensure that rentals are allowed. Consider both sides of a duplex a big plus and the availability of just half a big negative. Dig deeply into the rules and regulations of any townhome you consider.
Investing In A Duplex
The vital thing to think about when investing in a duplex is whether you will live in one of the two units. The pros and cons may differ depending on what you, the landlord and owner, decides to do. You may also have to give up certain things that you would ideally like for your living arrangements, like living far from neighbours or in a particular neighbourhood.
To make a good investment, you must think about the property and the type of tenant it will attract, rather than your wishes.
While some of these pros and cons change depending on the living situation you choose, so does the property’s value. House hacking, which we will talk more about in the next section, is one of the main reasons investing in a duplex is a good idea. The fiscal assurance of a duplex might change if you decide not to partake in house hacking.
Read on to the next section to understand the pros and cons of investing in a duplex, bearing in mind what your living arrangements would be.
Investing In A Townhouse
The significant difference between a townhouse and a duplex is that Townhouse units share walls with other units, similar to a condominium.
Depending on the layout, you may have both a front and back yard or a small patio area. Generally, there will be less yard space (and therefore less maintenance) than a single-family detached home or a duplex.
From a financing perspective, a townhouse is treated the same as a “normal” house. Since they usually take up less land and economies of scale to build a shared structure, you can often save money by buying a townhouse.
When looking at perspective townhomes to buy, ensure that the community allows units to be rented. Some have owner-occupied-only clauses. The rules are always available to buyers, and it is wise to go even further. Ask the trustees their thoughts on the rental properties in their communities.
Avoid purchasing any townhouse in a community that feels rental units are problematic or restrict how you will rent the property after you take ownership.
Pros of duplex
- Greater investment value – In the long run, duplexes have greater investment value than townhouses. For beginners, you have more flexibility and control in terms of maintenance and repairs as well as your repair schedule when you own both units of a duplex. You can also choose to rent out both of the units instead of living in one so as to generate more rental income and a generally greater interest over time than if you opt to invest in a standard rental property.
- You only share a wall with one other unit – When you live in a duplex apartment, you will be sharing a wall with only one other unit. Hence your space will still feel quite private.
- Freedom to customize the unit – Owning a duplex gives you more freedom to experiment with your unit’s different designs. Even as a renter, you are more likely to get permission from your landlord to add a personal touch to the unit than if you lived in an apartment complex under a property management company’s administration.
- Great way to get started in property investment – If you intend to get into property investment, purchasing a duplex is a great place to start since you can opt to live next door to your tenant and keep an eye on your property.
Cons of Duplex
- They are not easily available – Duplexes do not come by quickly in the rental market. As a result, you are less likely to find a duplex within an urban area.
- More responsibilities at hand – As an owner of a duplex, you are obligated to take care of both units’ maintenance and repair needs, which may be quite costly and time-consuming.
- Potentially living next to your tenant – If you choose to live in one of the units of a duplex you own, you will be right next to your tenant. This may result in disagreements, especially if there are no boundaries set for both the landlord and the tenant.
Pros of Townhouse
- Spacious – Townhouses are usually spacious, typically covering two to three floors. This makes them popular with families.
- Frequently occur in urban areas – Townhouses commonly occur in urban areas, allowing you to live in proximity to your workplace and reduce your commute’s distance.
- Amenities available – Besides private spaces such as driveways and backyards, you may also have access to amenities such as pools and playgrounds.
Cons of Townhouse
- You still have individual maintenance requirements even with an HOA – Even with the presence of an HOA, you will still have individual maintenance responsibilities. For example, if there is a leak in your roof, you may be responsible for fixing it.
- Limitations of an HOA – HOAs in some neighbourhoods are unreasonably strict, limiting your freedom to renovate your unit or even rent it out.
Townhomes and Duplexes are Great For Investors
One thing townhomes and duplexes do have in common are they’re both excellent choices for investment properties. Once you start looking to own multiple properties, for example, there are some significant advantages.
As well as the lower cost that we mentioned, there’s also ease of maintenance – for example, if you owned three townhomes in a row or both sides of a duplex, you only need to travel to a single location to deal with any issues.
A Completely Different Option
If affordability is what you’re after, you may want to look at the single-family detached homes in our Evolve line. With these homes, we’ve streamlined the building process to cut costs, and we’re passing those savings on to you. Depending on the size of the home you’re looking for and the features you want, you can get an Evolve home for a price that fits your budget.
Both townhomes and duplexes are affordable solutions for those who want a comfortable home, and our Evolve homes offer affordability within the traditional detached model. You should now have a good sense of the difference between the styles, but there’s nothing quite like seeing those differences in person.