The difference between a townhouse and a condo

Understanding the difference between a townhouse and a condo will help you understand how the property is being sold to you.

A general rule of thumb is that if you are buying a condo, you only own the interior of the building.

If you are purchasing a townhouse, depending on the bylaws of the homeowner's association, you may also own the outside of the property.

Townhouses have land underneath that you own, whereas condos do not.

When you buy a condo, you co-own the common property in addition to your living space. So, does this distinction have an impact on your tax bill?

Sort of.

There are two main factors that affect the amount of property taxes you must pay each year.

The first is the assessed value of your home, determined by the assessor, who looks at things like square footage, square footage, number of bedrooms and bathrooms, and comparable homes in the neighborhood.

Another factor is the levy, or the tax rate in your area, usually expressed as a percentage. mill levy is based on the quality of public facilities provided, such as the number of public schools, police force and parks in your town. The more facilities there are, the higher the levy will be.

The tax on single-family homes, condominiums and townhouses is calculated in the same way. It is based on the assessed value, which is then multiplied by the mill rate to determine the tax.

Lower property taxes for condos or townhouses?

Due to a number of factors, including size and number of bedrooms, you can usually expect townhouses and condominiums to pay lower property taxes than single family homes.

A condominium or townhouse has less space per taxpayer than a single-family home.

In the case of condominium occupancy, many taxpayers will share the taxable amount of the land and common areas, such as hallways, lobbies and stairs.

The owner of a townhouse is usually only responsible for paying taxes on the house and the land on which it is built, but that area is, on average, much less than a typical single family home. As a result, taxes on condominiums or townhouses are usually lower.

Different states and communities have their own real estate tax rules. For example, in California, Proposition 13 states that Mello Roos bonds (used to pay for community infrastructure) cannot be based on the value of the home.

Instead, these rules are usually based on the square footage, use, and lot size of a unit. You can check with your city's finance department to get local tax information.

Of course, there will be HOA fees for living in a townhouse or condo, which can offset those property tax savings.

Condos and townhouses may have HOA or condo association fees. These associations are elected boards that govern the facilities and maintain the standards of your complex.

Depending on the townhouse or condominium community, you may have an association that has a swimming pool and tennis courts, and someone has to pay for the maintenance of these facilities. As a homeowner, you will pay a monthly fee through the association. HOA fees are usually higher for condominiums than for townhouses.

Of course, if you don't have a pool or other similar amenities, your fees will be lower. Some communities even let you pay for heating through HOA fees.

Wherever you decide to live, make sure you do the math and consider HOA fees, etc., before deciding if buying a smaller property will really translate into lower monthly or annual fees.