What To Consider When Buying A Townhouse?

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Townhouses are a popular type of multi-family residence. Similar to, but not the same as condominiums, they are usually closely related to multi-story, single-family homes. For example, a townhouse typically has a one or two-car garage, the main floor with shared living spaces, and an upper level with bedrooms and baths. It may have a deck or patio and terrace, small garden area, and more.

A townhouse, though, is not a free-standing, single-family dwelling. It is often connected to at least another townhouse but may be part of a long row of homes with some “end units” having one outer wall.

And like condos, they can help to keep the amount of upkeep to a minimal amount, with homeowner or association fees taking care of issues like sewer, water, paved areas, shared spaces, garbage, and more. Townhouses can be built as affordable homes, but also as high-end luxury properties. They can be very minimalist or part of upscale properties with pools, gardens, and more.

What Is A Townhouse?

Townhouses (also referred to as townhomes) are multi-level homes owned by individuals that share at least one or two walls with the adjacent unit. Townhomes typically span two or more units and share similar, if not identical, facades. These side-by-side dwellings are generally narrower than a single-family home. However, townhouses provide outdoor space, and more often than not, a garage or carport.

Townhouses or ‘townhomes’ are traditionally 2-3 level homes that share common walls with a neighbour. They can range in scale from infill developments of 3 townhouses, up to master-planned estates in excess of 100 townhouses.

A typical townhome configuration is three bedrooms, two bathrooms and a single garage. Still, their growing appeal has resulted in more designs becoming prevalent, and 2, 3 or 4 bedroom townhouses with 1-2 car spaces are now very common. Most townhouses also have their own outdoor space in the way of a garden or courtyard on the title.

Quite often townhouse estates will have common facilities exclusively for residents like BBQs, parks or swimming pools.

Why Buy A Townhouse?

Location

When they’re in the right location, townhouses play an important part in residential housing. In a well-planned community, apartments are usually the closest to shops, transport and other amenities, houses are found further out in the quieter, private streets – and townhouses fill the gap between the two. In middle ring suburbs (10-20km from a city centre), townhouses are often the preferred housing type for developments, as free-standing new houses can be prohibitively expensive, and apartments not suitable for the local area. Stronger demand exists for those located in very close proximity to shops, transport and schools.

In outer-ring suburbs, and ‘greenfield’ developments (20km and more from a city centre), townhouses have become increasingly common, providing a more affordable entry price compared to house and land packages. In master-planned house and land estates, they are usually adjacent to parks, schools and retail centres. Planning for a new look for your house? Look no further!  MJS Construction Group  is here to help in your dual occupancy builder Melbourne.

 

Affordability

Because of their smaller size, buying a townhouse is generally more affordable than an existing home, or a house and land package.

That said, it’s important to compare like for like when looking at prices. We often see new investors try to compare the price of an existing house in a suburb to a brand new townhouse – two completely different properties. When looking at the price of a new townhouse in an established area, investors need to understand what the cost of new housing in that location is.

Often, you’ll only be able to get a brand new house by buying an old home, knocking it down and rebuilding – comparing this to a newly built townhouse, and it’s easy to see their relative affordability. When looking at townhouses within a master-planned estate, often pricing can appear very similar to the entry-level pricing of a house and land package. Investors should be wary though, as sometimes the advertised price of house and land packages do not include everything, and more money will need to be spent updating the home to get it to a ‘turnkey’ standard, for example, landscaping, driveway and fencing.

Strong rental yields

It varies market-to-market, but a well-built townhouse in a good location usually sees stronger rental yields than houses in the same area. For investors seeking cash flow for their property portfolio, townhouses can be an appealing option when compared to a free-standing house.

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How Much Does It Cost to Build a Townhouse Property?

There are many variables in such a question. For one thing, townhouses can be independent single-story structures in a housing project, or they can be buildings containing one or more two-story homes. For this discussion, we will look at a standard townhouse structure containing two single-family dwellings of two stories each, and which share a common wall. According to real estate statistics, the size of the average single townhouse as described above, is 2200 square feet which assumes a “footprint” of approximately 30’x35′ per home.

The building of a townhouse cannot be a “DIY” project and requires an architect, a knowledgeable contractor, a team of subcontractors, and a cooperative owner to get the job done in a suitable period of time.

For the building of a townhouse with two units, the typical costs include:

 

  • With mid-range materials, a normal foundation with full basement, an accessible attic, efficient doors and windows, all appliances, and “turnkey” finishing the project would cost an average of $261,465 per unit, or $522,900 to complete the entire building. This does not include acquisition of the building lot, however.
  • The above figures place this construction at a $119 per square foot cost, though national average stands between $85 to $125 for most commercial or multiple unit projects. This pricing structure is built on a fee base that indicates carpenters, masons and excavators charging an average of $70 per hour, electricians between $65 to $85 per hour, painters between $20 and $35 per hour and plumbers between $45 and $65 per hour.
  • This sort of building, however, could not necessarily come in at a simple cost of $85 per square foot due simply to the excessive amount of construction required on the interior spaces. The materials for a two-story unit of wooden construction, with two townhouses, would cost $258,500, labour would cost roughly $251,400, machine costs would stand at roughly $13,100, and the contractor would take in over $74,000 for the project. This excludes land acquisition and site improvements like parking, gardens and plays areas.

Cost Breakdown

What is included:

The basic structure of this project would be best if left in an uncomplicated “four square” design. Most developers rely on both an architect and a contractor, and the architect will require an additional fee of approximately 10 – 17% of the total building budget;

An architect will:

  • Determine the scope of the project and establish a preliminary budget;
  • Draft list of proposed work, budget, and outline of plans;
  • Create the schematic design and draft floor plans with elevation drawings. Then work with any structural engineers and meet with planning agencies to verify any requirements;
  • Finalize drawings and incorporate all details about materials and finishes, any fixtures or equipment, and all systems in the structure;
  • Serve as the manager and review the plans with any required local agencies while also obtaining necessary permits;
  • Serve in an advisory capacity to select a contractor and help the client through the bid review process as well;
  • Administer the construction, ensure that contractor’s requests for payments are accurate and that all “final” details are corrected or finished by the contractor; and
  • Based on figures given the architect on this project would receive from $52,200 to $88,900 for their services.

A contractor will:

  • Provide the services and materials required for the entire job;
  • Hire subcontractors according to need;
  • Suggest plans and ideas to the owner to help them meet goals;
  • Deliver final cleanup of entire home;
  • Pull all permits for work and utility installation; and
  • For doing all of the day to day management of the project, the average contractor earns around $85 per square foot. They might also “mark up” supplies and services. For example, on the average townhouse construction described here, the contractor might account for roughly $66,600 in markup and indirect fees.

What Does A Great Townhouse Look Like?

Townhouses have the most appeal when they are bright, spacious and modern. Location is crucial –everyday conveniences should be in close proximity. If you are looking for strong capital growth and tenant appeal, look for a townhouse that is only a short walk from everything a potential tenant would need – good local retail, public transport options and local parks.

When it comes to design, a well-built townhouse makes the most of natural light. They may have neighbours on two sides with windows only at the front and rear – but this doesn’t mean they have to be dark and gloomy. A well-designed townhouse is sensitive to its aspect and neighbours, capturing natural light from different angles through floor-to-ceiling sliding doors or skylights. MJS Construction Group has the best range of dual occupancy builder services to help you create your dream house.

Though they’re smaller than houses, townhomes should never feel cramped or be lacking in storage. There should be space to move between the living and dining areas and ample storage freely. When buying a townhouse, check the floorplan for built-in robes, sizeable pantries, and plenty of storage space suitable for bikes or sports equipment.

Whilst a standard, the single-part contract is still the most common type for a new townhouse property, and split contracts are becoming more popular with developers. This is where the purchase of the land is on one contract and the construction of the property on another. The pros for the purchaser are that you need only pay stamp duty on the land. However, hold costs during the build period need to be considered. The finance process of split contracts can be tricky, so it is important to ensure you’ve got a good mortgage broker who is familiar with these types of contracts before proceeding.

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One of the perks of some new townhouses is the great community facilities on offer like parks, playgrounds, BBQs, fire pits for pools. These add appeal to townhouse developments and help to create a sense of community, with residents interacting in these common spaces. These features may have an impact on strata fees within a development, however carefully managed strata-costs can result in very reasonable strata fees – and these features can add significant appeal resulting in stronger rents, and stronger resale values too. Check what’s included with your townhouse, and the associated strata or maintenance fees to look after it – these costs should be factored into your purchase decision.

Depending on the development, the townhouse could be under a strata, community or freehold title. Strata title is just as you would find with apartments, where strata fees are contributed to maintaining the buildings and townhouse estate. Under the community title, each owner has full ownership of their lot, but pay to maintain communal facilities like pools, entertaining outdoor areas, BBQ areas, and playgrounds. Under a freehold title (also known as Torrens title), everyone owns their lot completely, and there are no shared amenities. Before buying a townhouse, your solicitor will be able to explain which title your potential purchase falls under, and the implications of each.

Pros And Cons Of Buying A Townhouse

Weighing the benefits of owning a townhouse against those of buying a detached house or a condo can help you decide whether a townhome is right for you.

Here are some things to consider:

PROS

  • Townhouses that are closer to city centres or in commuter-friendly suburbs may be more affordable than detached homes in those areas.
  • HOA fees tend to be lower than with condos since townhouse owners have more individual responsibility for outdoor areas and building exteriors.
  • You’ll own a patch of outdoor space, which is especially nice if you’re a gardener or a dog owner.
  • It’s typically easier to get a mortgage for a townhouse than for a condo.

CONS

  • If you’re in a townhouse community with an HOA, you’ll have to abide by its rules.
  • Shared walls give you less privacy than you would likely have in a detached home.
  • Having more independence than you would in a condo also means more responsibility for maintenance.
  • If accessibility is an issue, bear in mind that since townhouses maximize vertical space, one-floor living generally isn’t an option.

Once you’ve decided a townhouse is right for you, zero in on specific townhome developments where you hope to buy. Compare the communities’ locations, amenities, HOA fees and rules. A real estate agent who’s experienced in working with condo and townhouse buyers can be a major asset in helping you track down these details.

Questions to Ask When Buying a Townhouse

Before you purchase a townhouse, you should know the answers to the following questions. Your real estate agent, the townhouse community representative, and your bank representative should be able to help provide information.

  • What are the HOA fees?
  • What are the HOA rules?
  • What does my HOA pay for, and what is there funding for?
  • Can I look at the past year’s HOA meeting minutes?
  • Are there any major repairs coming up?
  • Are there pet restrictions?
  • Can I rent out my unit?
  • What kind of community events are held?
  • Do owners socialize or tend to keep up themselves?
  • What kind of noise level can I expect?

Are you not sold on buying a townhome just yet? Use our condo versus townhouse guide to see how they compare to condos and find out which one is best for you.

What To Consider Before Buying A Townhouse?

Safety

Townhouses have one or two shared walls between you and your neighbours. It’s important to inquire about the construction of the walls and if they’re up to code. Having walls not up to the latest safety standard is not only dangerous but can also cost you a lot on repairs.

You should also ask if the shared walls are sealed securely to prevent any odours or smoke from seeping in through the walls.

Privacy

With the houses being very close together, having privacy is of the utmost importance. Inquire about soundproofing between houses or if the insulation material reduces any sound from next door. It’s one thing to hear everything happening in your next-door neighbour’s house. It’s worse knowing they can hear you through the walls, too.

Find a townhouse community that gives you as much privacy as you want. There are some developments that maximize privacy by creating private patios, balconies, and other outdoor spaces.

Ownership and maintenance

There are different ways to own a townhouse. You can have a condominium townhouse ownership, meaning you own everything inside the home but not the exterior. This option is best for some because the maintenance of the homes’ exterior features falls on the condominium association.

Another type of ownership is the single-family townhouse with a homeowners’ association (HOA). For this, you’ll own everything including the exterior of the home and the lot it’s attached to. However, you have to follow the terms and conditions of the HOA on the upkeep of the home’s exterior.

Amenities

Choose a townhouse community with amenities that best fit your lifestyle. Many townhouse communities have amenities that encourage residents to socialize like recreational centres, pools, and sports facilities. More luxurious communities provide residents with golf courses, concierge services, and the like. Finding the right duplex build  is an important decision. Check out our range of the best home design constructions at MJS Construction Group.

Getting A Townhouse Loan

Buying a townhouse is very similar to buying a house. Owning the land beneath the townhome, and not just the interior of the unit, makes all the difference — lenders treat townhouses in the same way that they do detached single-family homes. It’s a big contrast with buying a condo, which involves a much higher level of vetting; for instance, the lender will usually want to inspect the complex’s finances, not just the home buyer’s.

If you’re planning to buy a townhouse that comes with HOA fees, be sure you’re including that monthly budget item when you’re figuring out how much house you can afford.

But overall, to buy a townhouse, you’ll go through the same steps as someone buying a detached home: saving up a down payment, comparing lenders, getting preapproved and (finally!) shopping for your new home.

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