Which is Right for You: Freehold or Condo Townhouse?

Investing in a new home is an exciting milestone, but it can also be overwhelming. Trying to decide between the various types of homes is a big decision, and there are various factors to consider when choosing between a freehold or condo townhouse.

Let’s explore the pros and cons when comparing freehold townhouses vs condo townhouses, and uncover the affordability of each to help you make a decision with confidence.

What to Expect in a Townhouse: Freehold or Condo?

Essentially, a townhouse is a multi-floor home that shares one or more walls with neighbouring properties (but has its own entrance).  

The description townhouse doesn’t refer to a single property type, but rather a range of similar structures. Not all townhouses are created equal and there are small nuances that separate the different types of townhouses, categorising them as either freehold or condo townhouses.

The biggest difference between a freehold townhouse and a condo townhouse comes down to land ownership. When you buy a freehold townhouse, you own both the building and the plot of land. When investing in a condo townhouse, you likely only own (and manage) the interior of the structure.

Both types of townhouses are a popular option for first-time homeowners and empty-nesters, providing a comfortable space for single families. They are also a great option for those who want to live a low-maintenance lifestyle. Consider that there are no large gardens to groom or expansive spaces to look after and maintain on your own.

What is a Freehold Townhouse?

A freehold townhouse is known by several other names, including a row house. The term describes a house that is attached to a row of 2 or more adjacent buildings. In most instances, the front of a freehold townhouse opens up onto a public road.

As an owner of a freehold townhouse, you’ll be responsible for all maintenance and costs associated with both the home and the property. There is no communal approach to maintenance. Instead, the responsibility of maintaining the property lies solely on the owner’s shoulders – as does the decision-making process on what to upgrade and when.

What is a Condo Townhouse?

In comparison, ownership of a condominium mostly refers to the interior of the building. The exterior of the building and common areas are normally co-owned by all other tenants. For example, the cost and maintenance of the gym, pool, grounds, and even the airspace is shared among all tenants.

All tenants pay a monthly maintenance fee to the homeowners’ associations (HOAs). Sometimes referred to as condo fees, the cost makes sure that all significant maintenance costs are covered. These costs can include shovelling snow during the colder months to repairing a damaged roof.

In addition to managing the condo fees and organising maintenance, the HOA also establishes the rules for all tenants.

Townhouses are most commonly found in major urban areas or densely-packed suburbs where housing (and space) is a commodity. Townhouses provide an affordable option to live near work and amenities, appealing to people of all demographics.

The increase in demand has pushed the cost of townhouses up. For example, townhouse prices increased 10.9% on average in the last quarter of 2020.

One of the most notable differences between a freehold townhouse and a condo is the initial cost of investment. Freehold units are more in demand, and therefore available at a higher cost.

Consider that the average freehold townhouse in the Greater Toronto area sold for $1,080,388 in July, 2020. In contrast, the average condo townhouse sold for $724,655 in the same year.

While the initial cost of a condo townhouse may be lower, the condo fees add up over the years. Regardless, the affordability of the condo townhouse combined with the single-family atmosphere makes them a popular option.

Other costs to consider are property taxes, home insurance, home inspection costs and mortgage rates, which may vary from one property to another.

Finally, you need to consider resale value and return on investment. There are many factors to consider, such as the maintenance of the building over the years.

Pros of Freehold and Condo Townhouses

Understanding the benefits of both freehold and condo townhouses gives you the power to make a confident decision. First, let’s explore the pros of owning each type of property.

Pros of a Freehold Townhouse

A freehold townhouse is a great option for someone who is looking to buy their first home with plans to move up in a few years. Freehold townhouses also appeal to investors as there is an opportunity to earn a positive return on investment.

• Freedom to change the interior and exterior of the home without asking permission
• Save on condo fees, which can cost a couple of hundred dollars each month
• Higher buyer demand leads to a greater appreciation for the property

Pros of a Condo Townhouse

Condo townhouses are a popular choice for buyers who want to live within a specific area but can’t afford a standalone house, as well as those who desire an exclusive community. Frequent travellers also enjoy investing in condo townhouses as there is less effort needed to maintain the exterior.

• Lower purchase price when compared to freehold townhouses
• Less effort is needed for maintenance as the effort and cost are typically covered by the monthly condo fee
• Access to shared amenities such as a pool and gym without the need to maintain them personally

Cons of Freehold and Condo Townhouses

When investing in a home, it’s equally important to consider the various risks or pitfalls of the investment. Consider the following as a starting point.

Cons of a Freehold Townhouse

With the benefits of a freehold townhouse comes added responsibility. When investing in a freehold townhouse, keep the following considerations in mind.

• The maintenance cost of the exterior of the building is incurred entirely by the homeowner
• Investment price is higher due to increased demand (bringing the cost price closer to semi-detached and small detached homes)
• Additional responsibility to maintain the home and keep the property value high
• There is no control over the neighbours or their actions

Cons of a Condo Townhouse

Condo townhouses also come with their own considerations that need to be assessed. For example;

• Owning a condo townhouse comes with less autonomy on what you want to do with the exterior 
• Monthly condo fees can be expensive
• Special assessments, such as those stipulated by the Condominium Authority of Ontario, can lead to unexpected expenses

Which Townhouse is Better for You?

So, do you choose a freehold or condo townhouse? There are a few key details to consider before investing in a home. For example, do you plan to expand your family? Are you able to maintain a home on your own?

While a freehold townhouse is a more expensive investment, the initial cost has the potential to offer great returns if maintained effectively. Homeowners save on the monthly condo fees but take on the responsibility of maintaining the exterior of the building themselves. 

A condo townhouse is more affordable upfront, but monthly condo fees can add up. The benefit of someone else maintaining the exterior of the building can alleviate a lot of pressure and reduce the commitment. Ultimately, you need to consider your budget and which maintenance option best suits you and your lifestyle.