Many families in Montreal find themselves torn between buying a house in a residential neighbourhood or a townhouse closer to the downtown core. Choosing between the two property types comes down to your preferences and your personal lifestyle. Are you looking for a large back yard and lots of square footage, or something with a modern look? Are you comfortable with DIY or would you prefer a low maintenance option? To help you decide, we’ve made a comparison of each option as a primary residence as well as a financial investment.
Let’s start with house and townhouse definitions.
What is a townhouse?
Townhouses are conjoined, detached or semi-detached units owned by individual homeowners. Physically, they are usually narrow buildings spread over 2 or more floors, often with small private or semi-private yards. Townhouses fall into two types of ownership; freehold townhouses, and condominiums. In a freehold townhouse, homeowners own the land on which the property is located, as well as the yard and walls of the home. With condominium townhouses, like with traditional condominiums, the plot of land and common areas belong to a home ownership association (HOA), to which the homeowner will pay monthly fees for maintenance 0f the common areas, trash pickup, and snow removal. A HOA might also enforce certain restrictions when it comes to community aesthetics such as fencing, curb appeal, and exterior wall paint.
What is a detached home?
A detached home, in comparison, is a stand-alone building that does not share common spaces, land or walls with any other residence. A detached home owner is fully responsible for the ownership and maintenance of the property.
Advantages of townhouses:
- Affordability: Compared to a single family home, townhouses tend to be less expensive and therefore more accessible for first time buyers and young families.
- Modern features: Townhouses are generally designed for an urban demographic, and therefore offer updated features like hardwood floors, granite countertops, and open concept layouts.
- Low-maintenance: Townhouses that fall under a home ownership association offer the spaciousness of a single family home along with the convenience of a condominium when it comes to upkeep. HOA’s assume the responsibility for maintenance of common areas, landscaping, garbage pick-up and snow removal.
- Privacy and security: Unlike condominiums, townhouses have private outdoor areas that homeowners can customize to their own preferences. Moreover, their close proximity to the neighbouring buildings offer more security than a single family home would. It’s comforting to know that your neighbours will be watching over your home if you go out of town!
- Better amenities: Many townhouses offer shared amenities such as pools, courtyards, and tennis courts. Maintenance for shared amenities will be covered in the homeowner’s association fees.
- Location, location, location! While single family homes tend to be located further out in the suburbs, townhouses can be found in urban neighbourhoods closer to the Downtown core. This helps when it comes to resale and/or renting out the property.
Advantages of single family homes:
- Higher appreciation: Single family homes generally experience higher price appreciation, because the homeowner owns the land. Since land is a resource with a fixed supply, its value will always increase at a faster rate in response to population growth and GDP.
- Resale potential: Owner of a single family home will never be restricted by homeownership rules regarding the use of their facade or outdoor spaces. The ability to enhance the exterior through landscaping can be a strong selling feature for a property.
- Square footage: Detached homes are usually larger than townhouses and therefore can better accommodate a growing family. Many detached houses also offer larger yards, which can be used to gardening or outdoor entertaining.
- Privacy: Owners of a single family home can benefit from a higher level of privacy, because they own the land on which the property is located and can implement additional security features such as fenced yards.
- Uniqueness: All single family homes are completely different. They usually reflect the decade in which they were built, offering a historical character that is missing from new condo developments.
Which is the better investment?
The question of which property type is the better investment completely depends on your needs and your goals as an investor. Single family homes offer higher appreciation rates and resale value, while townhouses residents under a HOA do not own the most lucrative part of the investment – the land and common areas. If you plan to profit from long term appreciation through a buy and hold investment strategy, a single family home is right for you.
However, townhouses are easier to rent out because of their central locations, amenities, and convenience. If you plan to profit from passive income on a rental property, and you prioritize low maintenance over high appreciation, a townhouse may be a better investment option.