Considering the Purchase of a Condominium or Townhome as an Investment Property?

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
Considering the Purchase of a Condominium
or Townhome as an Investment Property?
Have you been thinking about entering the real estate market as a first-time investor?
Could your investment purchase include a condominium or townhome?
It's something many are currently considering as each property type can offer advantages to an investor looking to dip their toes in the real estate investment market for the first time.
Here's one example of that being true ...
Exterior maintenance of Condominiums and Townhomes is typically taken care of by the HOA (Home Owners Association).  The HOA pays for the maintenance out of the fees collected from property owners on a monthly basis.
Especially for first-time or less-than-handy investors, this can be a real advantage to their ownership.  And it makes them an attractive choice for first-time real estate investment.

But if you're considering the purchase of a condo or townhome as an investment property, it's important that you are in possession of some important facts regarding each property type prior to the signing a contract for purchase.  

What you need to know is: 

  • That there are differences between Condominiums and Townhomes  
  • WHY the differences between the two types of property will matter to you
  • HOW those differences affect the ownership you'll acquire upon purchase

You should also know that which type of property you buy ... and the distinctions between them ... will also matter greatly to your Mortgage Lender, if borrowing funds to purchase.  Downpayment, escrow funds, interest rates ... even the mortgage process itself, can be dictated by the type of real estate property you purchase.

For Condominiums:  
  • Ownership will mean detailed scrutiny of the financial and legal status of the Condo Association by the Lender
  • Loan Approval and Loan Terms will be dependent on the approval of the Condo Association's budget, By-Laws, Declarations  
  • The overall "strength" of the Condo Association will also be of major concern to the Lender, as it too will dictate Loan Approval and Loan Terms
  • * For loans on Condominiums where the downpayment is LESS THAN 25% of Purchase Price/Value:  The financing can cost up to 3/4 of a point in additional Closing Cost Fees.  Or it can result in a higher Interest Rate incurred than that incurred on a Townhome or a Single-Family Residence
  • Condominium Association's HOA (Home Owner Association) dues are typically higher than those of Townhome Projects (a/k/a Planned Unit Developments (PUDs).         

  • In Condominium Projects:  Common Areas and Building Exteriors are maintained, repaired, and replaced by the Homeowner's Association from funds collected and maintained in what is called the "Reserve Fund".  
  • Mortgage Lenders require acceptable levels of Association Reserve Funds, typically 10% or more of the total operating budget, to be set aside in a Reserve Fund Account. 

For these reasons and more, it's vitally important that Investors or any Buyer ... not just Mortgage Lenders ... completely understand that Condominium Rules, By-Laws, Declarations, Management, Budgets impact the cost and "lendability" of the property in question.  And that they all potentially affect the eventual marketability of the Condominium in a sale.  

Also important to know prior to making a property type choice:  As a rule, Townhomes in Planned Unit Developments do not typically have the same issues as Condominiums when it comes time to finance, buy, or sell.  

Subsequently, when it comes time to move forward with the borrowing of funds for the purchase a Townhome, then underwriting of a loan, they do not face the same scrutiny by Mortgage Lenders.  

For an Investor to make a wise real estate property choice, they also need to know the most common differences found between Condominium and Townhome (PUD) property types.  Those are:  

  • The distinct legal structure of each property type's Development (Plat)  
  • The distinction of who owns the land in each property type:
  1. In the case of the PUD/Townhome:  It's the individual
  2. In the case of a Condominium:  It is "common ownership" (Association Owned)  

"Clues" regarding Legal Ownership Rights are readily available and discernable to experienced Mortgage Lenders and Realtors.  So buyers shouldn't take chances. 

When buying an Investment Property (or your first property), don't work rookies.  Choose and consult with an expert when financing or purchasing any attached property, whether they're called a Condominium, Townhome, Duplex, Patio Home, or another localized design name.  

Work with experienced professionals only ...
* Thinking of buying, building, or refinancing a home or Investment Property in New Lenox, Will County, Chicagoland - IL/WI?

For thorough, detailed financing advice and assistance, contact me! I'll put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:
Gene Mundt

Mortgage Originator  -  NMLS #216987  -  IL Lic. 031.0006220  -  WI Licensed #216987
American Portfolio Mortgage Corp.
NMLS #175656

Direct:  815.524.2280
Cell/Text:  708.921.6331
eFax:  1.815.524.2281
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656


Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 


Your Referrals & Testimonials are Always Greatly Appreciated! 




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Home Buying
Illinois Will County New Lenox
Advice for Buyers
buying investment property
investment property
real estate investment
real estate
talk to a lender
legal ownership
townhome vs condo
lending process for condo
lending process for townhomes

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Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Hi Gene... what a great explanation of the differences between condos and townhomes. Many of ours have significant limitations (especially condos) on rentals... so investors really need to do their homework when buying a condo.

Sep 17, 2019 11:55 AM #1
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi -   This really requires investigation. Every arrangement is different. When I was in a townhouse it was a condo with commons charges and 5her3 was HOA for all the condo phases. 

Sep 17, 2019 12:33 PM #2
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene great information.  Another important factor will be the percentage of existing investor to owner ratio.

Sep 17, 2019 01:48 PM #3
Trent Dalrymple (248) 854-0625
Texana Bank - Bloomfield Hills, MI
Allowing Mortgage Professionals to Lend Nationwide

Hi Gene,

Good info for potential investors when considering condo/townhouse properties for their portfolio.


If you would like to extend your market reach outside your state with no additional state licensing while still providing the same variety of programs,  contact me for details (248) 854-0625 or  You never know when a past client needs your expertise when looking for an aout-of-state property.

Sep 17, 2019 06:34 PM #4
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Good idea...and have an agent that first investigates wheher you can rent a unit before buying  it.

Sep 18, 2019 02:38 AM #5
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Gene. Nice explanation of the differences. It is important to understand financing issues upfront. Enjoy your day!

Sep 18, 2019 05:32 AM #6
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

This posting is what those people who are considering this subject are searching for and are glad when they find it. The next logical step is to contact the author

Sep 18, 2019 06:49 AM #7
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Excellent information. I own condos, townhomes, and duplexes for investment as well as the traditional single family.

Sep 18, 2019 01:53 PM #8
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Great information. I'm in a townhome now, after downsizing from a SFR and was considering a condominium, however, for most all of your distinct comparisons, we chose a townhome rather than a condo and couldn't be more pleased with our decision. 

Sep 18, 2019 06:08 PM #9
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Good post Gene! Here in this part of NC there is very little difference in the two! Most townhouses here are much closer to condos. Almost all townhouses here just own the ground under the unit, and everything else is common area! The insurance on them is much closer to condos 

Sep 18, 2019 08:47 PM #10
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Gene:

Great education in your post for investors, especially those considering a condo or townhome and not familiar with the differences and the issues regarding financing and other matters.


Sep 18, 2019 10:41 PM #11
Robin Wells
RAW Chimney Sweep and Inspections - Penetanguishene, ON
Giving Peace Of Mind One Chimney At A Time

Thanks for post and the explanations.  Townhouses here also typically have associations - the owners have the unit and their land and often the street, public areas, etc.. are owned by an association.  Even maintenance is often controlled by an association which can have positive benefits in some cases.  Condos on the other hand to me have always been more attractive but again one needs to be aware of what they are buying into.

Sep 19, 2019 03:58 AM #12
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

A great recap of what to know when buying a condo or townhouse.  This is a topic we definitely need to cover with buyers. When purchasing a condo or townhouse you are really "marrying" into a community!

Sep 19, 2019 05:41 AM #13
AndreaBFerreira CRS - SRS - CLHMS
Keyes Co. - Davie, FL
Miami Dade, Broward and Palm Beach County in FL

Thank you for sharing. very important to understand and educate our customers for a better understanding. 

Sep 19, 2019 10:46 AM #14
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Gene what a great explanation from a Lender Perspective what the differences can make financially for investors. Glad it got the proper recognition i.e.: the Feature recognition, Endre

Sep 22, 2019 05:36 PM #15
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

708.921.6331 - 40+ yrs experience
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