Often, you hear that location is the most vital factor when considering a real estate development project. You always hear, “Location. Location. Location.” While that still reigns true, there are more factors to consider than just location. Properties with tremendous potential for financial growth and revenue include real estate developments like apartment buildings, duplexes, and townhouses. These real estate developments have a high potential for multiple sources of income.
These multi-family dwellings are cheaper and more lucrative than single-family structures. The multi-family development market is poised to recover from a rough 2020, with a growth of 33% throughout 2021.
So, what are the differences between single-family homes and townhouses, and why does townhome construction cost less than single-family residence construction cost?
Differences Between Townhouses and Single-Family Homes
There are many differences between townhouses and single-family homes. Many of these differences derive from the proximity of the structure to other dwellings.
What is a Single-Family Home?
A single-family home is a free-standing structure that sits alone on a piece of property. Single-family homes have no common walls or a shared roof with any other residence. Each single-family home has its dedicated entrances, exits, and utilities.
These structures are what you ordinarily think of when you think of a house.
What is a Townhouse?
A townhouse is in many ways the antithesis of a single-family residence. These are multi-floored dwellings built in a series of units that share exterior walls and roofs.
The arrangement of these structures varies. Occasionally, they will be free-standing with no continuity, exist in clusters of two or three units, or form a long stretch of ten or more.
This style of home is popular in dense urban areas. They are the ideal option for first-time homebuyers that want to be near or in a city center and desire more space than is allotted by a condo.
Advantages of a Townhouse Over a Single-Family Home
Townhouses afford many advantages over single-family residences. Primarily, the cost of owning or building a townhouse is significantly less than the cost of a single-family home. These reduced costs are a direct result of the shared nature of townhomes. Adjoining walls, shared roofs, and a common area with other residences drastically lower townhouse construction costs.
Townhouses are also cheaper to maintain than their free-standing counterparts. The smaller size, continuous and compact qualities of townhomes make them easier to maintain. And, if there is a homeowner’s association (HOA), they are responsible for exterior upkeep. Being a part of an HOA is not free. Fortunately, HOA fees for a multi-family structure are typically less than HOA fees in a single-family neighborhood.
Other amenities that make townhouses more appealing than single-family residences are pools, clubhouses, or on-site gyms. These amenities are maintained and repaired by the HOA. The inclusion of private garages and patios are also potential perks of townhouses.
These benefits of townhomes are in direct contrast to single-family homes. It is often more expensive upfront to purchase a property because you are purchasing an entire lot in addition to the structure. Additional closing costs and larger down payments further increase the overall cost of getting into a single-family residence.
The True Cost of Townhome Construction
The national average to build a 1,500 sq. ft. townhouse is $166,500. Localized real estate demand, material, and labor costs affect this number. In a low-cost living area, building a single townhouse may cost as little as $77,250 for a 750 sq. ft. unit.
Expect to pay around $111 per square foot of townhouse construction. This price may reach closer to $125 per square foot for development in denser urban and higher-cost living areas. Even on the higher end, townhome construction cost is much less than the national average of $163 per square foot for single-family construction.
Townhouses are rarely constructed as singular units. They are usually developed in a series of four or five units, so plan to factor in the costs of building multiple units at once. It is not uncommon for an entire townhouse complex, which may include a shared pool, gym, and parking to cost $1,000,000.
Breaking Down Construction Costs
Every real estate development project varies, but you want your overall costs to breakdown into something that looks like this:
- Bathroom: 4%
- Kitchen: 8%
- Electrical: 10%
- Plumbing: 12%
- Foundation: 9%
- Floor structure: 12%
- Walls and exterior finish: 6% to 12%
- Roof: 10%
- Windows and doors: 5%
- Interior finish: Up to 10%
- Flooring: 3% to 5%
- Interior features: 3% to 5%
- Architect fee: 10.5% to 15% of total costs
- Structural engineer fee: $500 to $20,000
- Contractor fee: 25% of total project cost
Consider what you want your ideal project to look like and allocate your funds accordingly. Think ahead and ascertain the necessary figures and features you want to include in your project. Proper planning prevents budgetary issues and the scope of the project from sprawling out of control.
Build Your Dream Townhome Today
The costs associated with building or buying a townhome are much less than building a single-family residence. Townhomes reduce development costs by their sharing space and other compact characteristics. They further reduce costs by being developed in a series.
If you hate the thought of being part of an HOA, take heed that townhome HOAs are less expensive than single-family ones. They also take care of all exterior maintenance and upkeep.