By Emily Koelsch
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.
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.
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:
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.
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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:
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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