Difference Between A "Multi Family" and "Townhomes"

8 Replies

I have been wondering for a while what distinguishes the differences between these two things?

I often see townhomes where there are only 2 or 4 units all attached in one "building" but when you look them up they are categorized as townhomes and priced individually. What makes that different from a multi family property with 2-4 units that would be considered as a duplex etc. and priced as one unit.

Town homes are individually deeded  -with what is referred to as a lot and block - this just means that the property has its own tax/parcel id number - it can be owned separate from the other units. A town home wont have a unit above or below - the unit is owned from the ground or lot up to the sky.

Multifamily units are almost always going to be zoned as multi unit with the whole structure being one owner, tax id, etc. In most places can't be split to sell individually.

The difference is what you have found - how they are owned.  It does seem that in different areas one or the other is more common.  Newer construction definitely tends to be more towards each unit being owned separately.

One source of multi-unit properties is older, bigger residences that have been split in to multiple units even though the ownership is for the building.  With these it is especially important to ensure that all units are legal as rental units.

I see a lot of discussion in the forum about multifamily vs duplex and other multiple rental properties. Heres my two cents:

1. While townhomes typically have both ground and air rights (no units above and below), this is a physical description. Legally, they could just as easily be under a condo regime. The reality is that a single deed means that the townhouse or condo is a single family residence NOT a multifamily property.

2. Duplexes (2 to 4 units) are usually under one deed and hence they have multiple tenants. In the strictest sense of the word, they could be called multifamily. The lending community lumps these duplexes together with single family.  For discussion purposes, 1 to 4 unit investments should always be called single family as there is more than sufficient case law for doing so. One exception is that if the individual units have been legally divided, then like #1 above, regardless of their physical appearance, they are truly single family.

3. Multifamily - From a lending point of view, any building or set of buildings unified under one deed containing 5 or more units is considered a multifamily property. I would modify this for the purpose of this forum to say that any contiguous group of rental units could be called multifamily but one should be very careful of discussions regarding finance with the term multifamily. Regulatory requirements are very specific and 1 to 4 units will always be considered single family.

Owning multiple units in a condo, townhome, or duplex project is not multifamily - its multiple rental units.

Nicolas Paez

Thanks @Nicolas Paez

So there has been a lot of discussion about properties which have more than 4 units and how they are considered "Commercial". So in this sense a commercial property is in essence a multifamily whereas a Single Family Home can consist of up to 4 units but then can be described further as duplex, triplex. etc.

No, I would still categorize "Commercial" as anything that is not residential. Owning a an apartment building is like running a business so the term commercial fits but lets stick to calling it multifamily.

Travis, let's say the zoning allows multifamily. It's a fourplex. The owner of the fourplex has all four rented out. Are you saying he could not sell the four units separately? And if he wanted to, what would he have to do? Where do you find whether the fourplex units can be sold separately? Can't be in the zoning ordinance, right?