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Condos vs. townhouses: Which is a better investment in New York City?

It’s tricky to compare a condo to a townhouse; square footage is measured differently, for starters.

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2020
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As with any plan to buy in New York City, your choice of one type of housing over another will be based as much on finances as individual preference. One buyer might prioritize the full-service aspect of living in a condo while another might prefer the relative privacy of a single-family home. Both will have to keep the budget in mind.

If you are weighing the relative merits of a condo versus a townhouse as an investment, consider how you might use your asset; whether you plan to live in it or rent it out; what your long term goal is; and whether you prioritize amenities and views over privacy and a back yard. 

Keep in mind too that comparing a condo and a townhouse is not necessarily a comparison of apples with apples. Jonathan Miller, president, and CEO of appraisal firm Miller Samuel, points out there are factors that complicate this type of analysis—one of them is square footage which is not measured in the same way for a condo and townhouse. 

If you are weighing whether to buy a condo or a townhouse in NYC, here are the considerations to keep in mind. 

Square footage measurements shrink a condo

The average Manhattan townhouse is 4,736 square feet, according to the latest report by Douglas Elliman and has a median sale price of $4,800,000. But condos and townhouses are measured differently; a condo’s size is based on its interior walls, whereas the square footage of townhouse includes the exterior walls. 

Miller says that can result in a 15 percent differential, making a 4,736 square feet townhouse equivalent to a 4,000 square foot condo. 

“It makes the townhouse square footage larger, which makes it cheaper on a square foot basis,” he says. 

Watch out for a townhouse listing where the square footage includes potential buildable space in the backyard. Alex Antigua, an agent with Platinum Properties, says townhouse buyers often want to expand the kitchen at the back and he has seen sellers and brokers include that potential square footage as part of the numbers.

Views skew prices for condos

A condo with a listing price comparable to a townhouse—in the $4 million range—is likely to have an open, expansive view factored into the sales price. A townhouse will rarely have an open city view, eliminating one area of comparison between the two housing types. 

There are a lot more condos than townhouses in NYC

Townhouses make up a comparatively small portion of the housing available in New York City and Miller says the buyers for these two properties “are essentially representing different markets.” 

A condo buyer is usually prioritizing amenities including the view but also the security and convenience of a full-service building. A townhouse buyer is putting a premium on privacy and the freedom to renovate and sublet without board oversight. 

Townhouse buyers represent a narrow subset of the luxury market, which is 2 percent of the residential sales Miller says. 

However, they are always fairly in demand, says Jordan March, a broker with Halstead. “While many older luxury condos fail to compete with the ever more plentiful inventory of new development, townhouses are a timeless and always coveted product.”

Condos, however, represent a much higher share of sales, so if you plan to resell, consider what more buyers are seeking.

Townhouse sales are down, so there may be some opportunities

Townhouse sales are sluggish at best in the current market, says Ian Wolf, an agent at Douglas Elliman. A glut of high-end condos has impacted the luxury apartment market, and rent reforms capped a landlord’s income from rent-stabilized apartments, which means multi-family townhouses are lingering on the market or selling well below asking

Wolf says this has drawn their overall numbers down to a point where there are “amazing values throughout the city.”

In his view, this points to townhouses being the better investment. 

“The relative value of townhouses compared to purchase prices of condos combined with the significantly less out of pocket costs to maintain the townhouse compared to the monthly common charges and taxes of a condo helps move the needle even further toward townhouses,” he says. 

Antigua says it’s all about what kind of townhouse you invest in. He’s seeing investors doing full gut renovations of townhouses in Harlem which they’ve picked up in foreclosures at between $950,000 and $1.3 million.

“They then rent out apartments within the buildings for a good income, generating a 5 to 6 percent return on investment in that type of purchase,” he says. 

March points out some of the “best growth in all of Manhattan [is] founded in the resurgence of Harlem and BedStuy within the last decade.” These neighborhoods are seeing the rehabilitation of older, dilapidated townhouse inventory and a rise in rental prices. 

Townhouses don’t have common charges, and taxes are often lower 

Owning a townhouse can present some opportunities when it comes to investment, including renting out an apartment within the building (as long as your Certificate of Occupancy allows). Wolf points out that a townhouse purchase might also allow you “to build upward to expand on your square footage or sell any available air rights offering further monetary upside.”

March says the major benefits of townhouses are the low carrying costs. “Townhouse owners are responsible for all maintenance but can save when they don't have to pay monthly common charges, with real estate taxes often lower as well.” 

Condos are easier to rent

If you are buying the property to rent out, finding a tenant for a condo might be easier than finding a tenant for an entire townhouse unless of course, you are configuring the townhouse as a multi-family. 

Speaking on the Brick Underground Podcast, Miller says as high-end condo owners list their places as rentals rather than sell, rents are being pushed up for these types of apartments. 

“In the high end, the rents are rising faster and you are seeing listings that are not usually in the rental pool—and they are being snapped up because they are somewhat unusual,” he says. 

The most popular rentals, however, are smaller apartments. March says condos are still the go-to for investments because of “moderate affordability, the ability of foreign investors, and no sublet limits.”

“The safest purchase,” according to Antigua, is a studio or condo for under $1 million that you can rent out for around $3,000, producing between a 2.9 and 3.3 percent return on investment. A townhouse, on the other hand, involves a much bigger financial outlay. 

Earlier versions of this article contained reporting and writing by Leah Kamping Carder.