Which is the Better Investment:
A House or a Town Home?

Question: I can't decide whether I should buy a town house or a single-family home that's about the same size. Which appreciates faster?

June Fletcher: Pop quiz: What's the difference between a town house and a condominium?

Answer: The truth is, sometimes they're the same and sometimes not.

The answer matters because some local data collectors arbitrarily group price and sales statistics on town houses with those of single-family detached homes; others include them with condominiums. Either way, it's likely that at least some town-house developments in any city have been put into the wrong group.

The confusion comes because a town house, which is simply a multi-story, attached residence, can be owned one of two ways -- either with or without the lot. If the developer includes the town house's lot in the sale, ownership is "freehold" or "fee simple," just like most single-family detached homes. If the lot isn't included in the sale, the town-house development is considered either a condominium -- where owners own everything up to party (or shared) walls individually, but share ownership of the land and common elements like pools and swimming pools with other neighbors -- or a co-op, where individuals receive a fractional stake in buildings, land and common elements that are owned and controlled by an association.

The way a property is owned has a big impact on payments for insurance, maintenance and homeowners' association fees. So it doesn't make much sense to try to compare a condominium or co-op town house with a fee-simple single-family house merely on the base of purchase price.

Other factors, like finishes, location and demographics, muddy the comparison, too. For instance, will a 2,000-square-foot urban town house with granite countertops, crown molding and marble floors, targeted to empty-nesters, build up equity faster than a same-sized house with a big yard way out in the suburbs, built for young families? It depends on whether there are more empty-nesters in the area looking for homes at the time you want to sell, or more young families.

If you have already narrowed your search to a particular town house and single-family house, it may be worthwhile to check public records at your local municipality or online. But don't assume that these rates will be constant forever (even though some economists make that very assumption when they make their pricing prognostications). A change in traffic patterns that creates gridlock might make an urban town house more valuable to buyers in the future than a comparable suburban tract house; conversely, an uptick in crime in a neighborhood may cause buyers to flee to the 'burbs. Since such events are inherently unpredictable, you might as well just buy the house that you like best.

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

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