By Emily Koelsch
Investing in Rentals in HOAs
Homeowners Associations (HOAs) are becoming increasingly popular across the country. Fifty years ago, less than 5% of people lived in communities governed by HOAs. In contrast, around 25% of Americans are currently part of HOAs. Once thought of only in the context of condominiums, there are now homeowners’ associations for townhomes and single-family home communities too.
Given their growing popularity, more real estate investors are faced with the question of whether or not to buy rental properties in HOAs. To help you answer this question, here’s an overview of HOAs, the pros and cons of owning rentals in HOAs, and tips for anyone considering investing in real estate governed by an HOA.
What is a Homeowner’s Association?
A homeowner’s association is a governing body that manages and regulates a residential community. The purpose of HOAs is to set rules that all members must follow to maintain established standards that benefit the whole community. Generally, HOAs are run by a board of directors elected by the HOA members.
When purchasing a property, the agent or property manager should disclose if it’s part of an HOA. You need to have this information from the outset because if you buy a property in an HOA, you are automatically part of the community and bound by its rules. You cannot opt-out.
Each HOA must outline all rules, regulations, and fees in their Covenants, Conditions, and Restrictions (CC&R). This is a public document that HOAs must file with the local county assessor’s office.
Benefits of Buying Rentals in HOAs
There are some distinct reasons that HOAs are becoming increasingly popular. Perhaps the most compelling, properties in HOAs maintain their value well and often appreciate at above-average levels.
HOAs also offer some distinct advantages for real estate investors:
- Amenities that help attract Tenants. Communities with HOAs usually have more amenities than other properties, like a gym, swimming pool, playground, or tennis court. These amenities help Landlords attract Tenants while also increasing rental values for units in the community.
- Fewer maintenance responsibilities. Owning a property in an HOA means less maintenance for Landlords and Tenants. HOAs usually handle landscaping, snow removal, and trash services. The result is less work for Landlords and the peace of mind that the property is well maintained.
- The Property and neighborhood stay in good condition. HOAs set specific standards for all properties and outdoor spaces. In addition, they have systems in place to ensure that all members comply with these standards. For Landlords, this is good for both property values and attracting Tenants.
- Mediation of disputes with neighbors. When conflicts arise in HOAs, the board helps to mediate and resolve disputes. This resource helps alleviate Landlord headaches that can come with difficult neighbors.
Disadvantages of Owning Rental Units in HOAs
As you might imagine, HOAs also have some substantial disadvantages for Landlords. Here are the most significant challenges investors should consider before purchasing a rental in an HOA.
- Rental restrictions. HOAs can set limits and regulations for renting properties in the community. Common Lease restrictions include limiting the number of Leases per year, establishing a minimum lease period for short-term rentals, requiring owners to live in the unit for a certain period, and capping the number of units in the community that can be rentals. Investors should always read the CC&Rs before purchasing a rental unit to be familiar with applicable restrictions. Also, it’s important to realize that HOA rules can change, so even if there aren’t currently restrictions, there’s always the risk that the board will add new restrictions.
- Management expenses. HOAs assess monthly, quarterly, or annual fees to cover the cost of maintenance and amenities. These fees vary widely based on the services and amenities provided, and this fee cuts into a Landlord’s monthly cash flow and annual returns. It’s vital to include this expense when running the numbers on a property, and it’s also worth noting that fees are regularly reassessed and generally increase over time.
- Special Assessments. When an HOA board determines significant repairs or upgrades are needed, they’ll require a special assessment from all members to cover the expense. Special assessments are unpredictable costs for Landlords that directly cut into cash flow and returns.
- Interference with property management. HOAs can set rules and restrictions that interfere with a Landlord’s management of their property. For example, banning certain types of pets, setting specific Tenant Screening criteria, requiring Tenants to review and sign by-laws, and having strict requirements for upgrading or repairing your property. These regulations can increase management costs and Landlord headaches while also making it harder to find Tenants.
- More Landlord liability. When you own a property in an HOA, you’re responsible for complying with all rules and fees. If your Tenant violates rules, you’re ultimately the one who will have to deal with the HOA, resolve the issue, and pay any fines. Additionally, if you pass on HOA fees to a Tenant and the Tenant doesn’t pay, you’ll be responsible for this fee and any late charges.
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Tips for Investing in Rental Units in HOAs
There is no blanket answer to whether investors should buy rentals in HOAs. Instead, it’s an issue to address on a case-by-case basis. Here are some tips to help with this analysis:
- Always review the CC&R and be familiar with any rental restrictions that will impact your business.
- Analyze monthly fees to determine whether you can recoup these costs. For example, can you increase rent to cover the cost of amenities, and are the maintenance expenses comparable to the amount you would have to spend to keep the property in good condition?
- Consider the potential for a special assessment and have an emergency fund to cover this expense.
- Think through the risks associated with HOAs – for example, changes in rental restrictions or fees – and determine whether this is a risk you’re comfortable with.
Thinking through these tips will help you make an informed decision about rental properties in HOA. As you expand your portfolio, visit ezLandlordForms.com for investing tips, Tenant Screening Services, and state-specific Lease Agreements.
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By Emily Koelsch
Digital landlord is an increasingly popular term, so we thought we’d dig into what it means for real estate investors. Before getting started, it’s important to note that there are two different types of digital landlords: those that manage digital assets and those that use technology to manage physical real estate.
We’ll discuss the second category – Landlords that leverage software and technology to manage their real estate portfolios. To help you understand this growing category of Landlords, we’ll discuss what digital Landlords are, why this strategy is increasingly popular, and how you can get started as a digital Landlord.
What It Means to Be a Digital Landlord of Residential Real Estate
A digital Landlord is someone who uses technology to self-manage their rental property. A true digital Landlord uses technology in every phase of the rental process, including:
- Marketing the property
- Rental applications and tenant screening,
- Lease creation, signing, and renewal
- Collecting rent and issuing rent receipts
- Sending official notices
- Tenant communication
- Keyless entry
For example, a digital Landlord markets their property using online platforms like Zillow; provides applicants with an online rental application; screens Tenants using online screening services; creates a Lease electronically that can be reviewed and signed online; and uses electronic rent payment systems.
The Benefits of Being a Digital Landlord
There are some clear benefits to being a digital Landlord, and we’re seeing more investors take this approach. The biggest benefit is that it makes property management more efficient. This increased efficiency makes it possible for more investors to manage their own rentals.
Real estate investors benefit from self-managing their properties because it allows them to select Tenants, oversee repairs and maintenance, and stay in communication with Tenants. Unfortunately, property management can be time-consuming and stressful if you don’t have the right tools. Digital landlords take advantage of technology to automate more tasks and make property management less time-consuming.
Another huge benefit for digital Landlords is flexibility. They can manage properties from anywhere and have more control over the hours they dedicate to property management. This means investors have the flexibility to buy properties out of state, move, or travel.
Beyond these two advantages, there are several other benefits of being a digital Landlord:
- Consistently for Tenants. Automated systems and procedures provide consistency for Tenants. This consistency improves Landlord and Tenant relationships and improves your Tenant’s experience.
- Necessary records and documentation. Effective systems for property management help you stay organized and ensure you have the documentation you need for taxes and dealing with Tenant issues.
- Preventative Maintenance. Leveraging technology makes it easier for Landlords to be proactive about preventative maintenance and repairs, which helps keep rental units in good condition.
- Scalability. Once you have property management systems in place, it’s easy to grow your real estate portfolio and continue to self-manage your properties.
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The Tools You Need to Get Started a Digital Landlord
The key to becoming a successful digital Landlord is having the right software, resources, and tools. Each Landlord develops their own systems, but there are a few “must haves” to be successful as a digital landlord.
Here’s our list of tools you need to get started as a digital Landlord.
- Online rental application and tenant screening services.
- Electronic Lease creation, signing, and storage.
- A system for Tenant communication, including both informal check-ins and maintenance requests.
- A system for sending official documents like Notices and Lease Renewals.
- Electronic rent collection.
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The rental housing market expanded over the past decade thanks to a growing customer category – the single family property renter. As waves of interest rate increases and property value inflation priced many potential homeowners out of the market, consumers (especially young, upwardly mobile professionals) re-defined their expectations. They settled for tenancy over homeownership. However, their aspirations for “big space” living, combined with a growing preference for remote work situations, resulted in increased demand for single family property rentals. These new single family renters present opportunities and risks. Finding quality, long-term renters is a property manager’s dream. However, dealing with credit risks, scams, and delinquencies is always a nightmare. In this blog, we show single family property managers how automated leasing tools alleviate current operational challenges, accelerate qualified lead conversions, and effectively combat rental fraud.
1. Automate for Leasing Success in 2024
Despite the economic headwinds impacting the housing market, at large, the single family rental property market offers a silver lining.
Single family housing inventory is expanding, creating opportunities to capture new revenue from an expanding market of new renters.
The Department of Housing and Urban Development (HUD) recently reported that single family housing completions in January 2024, were 2.8% above the number in January 2023. Fannie Mae reported a similar growth trend by projecting that 2024 single-family housing starts to be 5.7 percent higher than in 2023.
While this increased supply and demand bodes well for all involved, single-family operators still face operational challenges before achieving leasing success.
For instance, because the parallel growth in inventory and demand is likely to hold rental rates steady, operators must find new ways to strengthen their bottom line. Also, in order to maintain high occupancy rates, property managers must accelerate leasing velocity and convert more leads. All the while, inflationary pressures continue to constrain operating budgets and staffing shortages persist. Increasingly, property managers must “do more, with less”.
As a result, property managers are discovering that automation alleviates many of their current operational pressures and even offers the potential to achieve ROI gains.
“Leasing automation is the ultimate ROI enhancement,” Rently COO Andre Sanchez said. “It plays a key role in facilitating better, more personalized experiences for customers while moving them through the entire leasing process faster and more efficiently.”
By integrating leasing automation tools into their lead management, operators have seen conversion rates of 30 percent or more. In fact, often and ideally, by the time customers interact with a leasing associate, they are ready to sign a lease.
The decision to automate is an important first step towards leasing success. However, equally important is choosing which tasks to automate in order to still create a positive and engaging renter experience.
2. Become a Smooth Operator
In order to preserve renter engagement, while automating parts of the leasing process, it’s important for managers to optimize the entire renter journey.
Renters will hardly notice automations threaded through their journey if their cohesive experience is positive and smooth. In fact, by integrating multiple leasing steps into one seamless (frictionless) experience, automation benefits both renters and managers.
To increase leasing velocity, it’s essential for property managers to create an airtight “lead-to-lease” funnel that accelerates renter momentum and quickly drives conversions.
By using new and proven automated leasing tools, single family property managers can make sure to keep renters engaged and impressed during every step of the renter journey.
3. Introduce your property with dynamic online listings
Not so long ago, property listings could be found in newspapers or posted on flyers in leasing offices. With the Internet came exciting new marketing possibilities.
Internet listing sites (ILS) offer an effective way to reach millions of online renters and maintain constant contact with the marketplace.
Automating property listings enables syndication across multiple listing sites, creating a strong multiplier effect for lead generation.
In addition, the ubiquity of mobile devices makes it possible for renters to see online listings from anywhere, at any time, with real-time notifications of property availability. According to Zillow (2022 Report), 74% of renters now search for properties online using a mobile device, and 60% use an app.
Online listings are your first point of contact with a prospective renter. Make sure your listing includes the automations to keep that renter connected and moving forward through your marketing funnel. For instance, adding rental criteria to property listings quickly identifies qualified leads and saves time by screening out unqualified prospects.
4. Quickly set a tour date with automated tour scheduling
Leasing professionals understand the challenge of managing countless leads and trying to schedule them all for property tours.
However, imagine being able to instantly respond to 100% of your online leads with an automated option to quickly schedule a tour directly from a listing site. This feature is especially appealing to renters accustomed to on-demand experiences because it allows them to schedule and confirm a tour immediately after finding a listing that interests them.
Auto-scheduling tours accelerates leasing velocity by quickly moving your pre-qualified rental prospect from the initial interest phase to an onsite touring commitment.
In addition, by eliminating the time and hassle of manually arranging appointment logistics, your leasing teams can better spend their time on lead engagement at more important points in the renter journey.
Tour auto-scheduling saves property managers up to 30 minutes per requested showing. Multiply that by 100 showings, and you’ve just reclaimed a whopping 50 hours! That’s 50 hours your team can redirect towards other critical aspects of your business.
5. Show properties faster with automated tours
When a renter schedules a tour, an automation can offer them the choice of scheduling a self-guided tour, or an agent-led tour.
Self-guided property tours combine a user-friendly mobile app or web experience with property smart access devices like lockboxes or smart locks, creating a secure and independent property-viewing experience.
Self-guided tours offer managers significant time savings by eliminating the need to travel to and spend time on-site. In addition, self-guided tours increase overall touring traffic by 25%, boost lease conversions by 2% and reduce a property’s time on the market by 75%.
Originally designed to accommodate the 42% of renters preferring tours outside regular business hours, self-guided tours have widespread appeal. The ability to tour when convenient, combined with managing the entire process from a mobile app, resonates well with modern renters and property managers alike.
While self-guided touring has become a popular option, some renters still prefer the personal interaction of an agent-led tour. For these renters, automations also exist to streamline their experience. For example, when scheduling their tour, renters can directly sync to an agent’s calendar to find an opening and make a reservation. This eliminates time-consuming staff coordination.
6. Combat rental fraud with automated rental screenings
Single family rental properties are a serious investment, and it’s critical for operators to find renters with the financial stability to meet monthly payment obligations. Avoiding the drama and cost ( $7,685 per instance!) of evictions is a priority.
However, identifying high-risk renters is often a real challenge:
Source: NAA
Furthermore, the average renter screening process takes anywhere between 4-10 hours per rental application. In addition, 72% of property managers also noted the extra time and attention required to make sure that their rental forms meet the guidelines of the Fair Housing Act (FHA). This is all valuable staff time spent on just one leasing task!
It should come as no surprise, then, that automating the applicant screening process to activate multiple verifications at the same time, is a major time-saver.
It should not be complicated or stressful for prospects to tour and apply to rent a property. Similarly, it should be easy for managers to collect applications and identify quality residents. The smoother the process, the better the experience for everyone involved.
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7. Rently’s unique leasing automations
Years ago, Rently recognized that leasing automation has the potential to greatly benefit both renters and property managers. Based on real-world implementations, Rently saw that automations create an enjoyable renter journey, streamline leasing operations, accelerate lead-to-lease conversions, and enhance security. Therefore, Rently successfully integrated leasing automations into every step of the leasing lifecycle, from listings to leases.
Rently Listings, our company’s increasingly popular ILS receives 10 million visits and facilitates 3 million self-guided tours each year. Rently Listings is the #1 lead generation tool to reach today’s tech-savvy renters who want to tour on demand.
Rently Listings helps millions of renters find smart home properties that offer self-guided tours. Conversely, Rently Listings provides property managers with immediate exposure to a giant universe of renters who desire to tour on demand.
Rently Listings also automatically syndicates to more than 30 other listing sites. Therefore, property managers save hours of valuable time because they no longer have to manually upload/update listings to multiple sites. They can simply use Rently Listings to update all their listings, on all sites, at once!
Rently Listings automatically syndicates to the following ILS:
In addition to creating a listing platform that quickly drives prospects to smart home properties, Rently also offers groundbreaking, automated renter security and screening features. These save property managers hours – even days – completing the due diligence required to ensure quality tenants.
Even before a rental prospect enters a property for a tour, Rently completes a stringent ID verification process and ensures that prospects match the rental criteria set by a property manager. As a result, only qualified and verified renters gain access to properties.
Similarly, Rently’s screening automations also support post-tour leasing steps. For example, Rently automations prompt prospects to submit an application immediately after they tour. This engages renters at the peak of their interest and increases the number of applications submitted.
Once applications are submitted, Rently’s screening empowers managers to do their best due diligence. By combining six critical renter screenings into one automated process, Rently’s screening saves time and eliminates the hassle of verifying renter information with several third-party service providers.
Rently’s Screening auto-verifies the following renter data:
- Government-issued ID and selfie photo are matched, using facial biometrics before a self-guided tour
- Top fintech partners verify income documents, pay stubs, and W-2 forms
- TransUnion applies ResidentScore™ criteria (rental industry specific) to verify credit ratings, bankruptcy, eviction, and criminal records.
These automations expedite the screening process so that renters receive faster responses and managers accelerate lease signings.
Finally, Rently also offers a unique approach to data centralization and cross-platform integration.
From Rently’s centralized data dashboard, property managers are provided a single view of their property’s leasing automations. From there, they can track lead status as they make their way through the marketing funnel and engage with renters, in real time, at critical moments. In this way, automations allow managers to focus on what really matters – building relationships and closing deals.
To further maximize its value, the data collected by Rently’s leasing automations is easily integrated across popular PMS platforms. This is accomplished thanks to open APIs and customized plug-ins, such as those for Appfolio and Buildium.
Conclusion
Whether managing a small or large portfolio, single family operators benefit by using automated leasing technology to optimize operations, create a frictionless renter experience, and screen out high-risk rental prospects.
For Rently, automation is a leasing enhancement. It’s how we help property managers streamline time-consuming tasks and simplify operations to achieve larger business goals.
We see leasing automation as helping (often understaffed) property management teams move renters through the entire leasing process faster, while still creating a personal and positive experience.
Provided by Rently
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