Many new homes are found in common interest communities, which are governed by HOAs. Many investors are able to buy properties in these communities and rent them out successfully. However, you do need to be aware of a few key differences when you invest in these homes.
Whether your rental property is in a gated community or a condominium complex, consider these things before you buy.
Who Will Pay the HOA Dues?
When you buy a home in an HOA community, you’ll have to pay monthly, quarterly, or annual dues to the association. This money pays for things like security, exterior maintenance, landscaping, amenities and sometimes it also includes monthly bills like cable television, trash, and water. The amount you pay will vary, depending on your community. Usually, the landlord is responsible for paying these dues, so you’ll have to budget for them. You can require your tenant to pay them or include them in the monthly rent; just remember that this may make your property less competitive on the market. If tenants can find a similar home without the added expense of HOA dues, they might not rent your home. If your HOA includes benefits like a pool or a fitness center that your tenants can use, you can include those advantages in your marketing.
Remember that unpaid HOA dues can lead to foreclosure and large penalties. If you want your tenants to pay the HOA fees, it might be best to have them pay with the monthly rent so you can pay the HOA directly. Then, you’ll be sure these bills get paid.
HOA Rules and Regulations
Most HOA communities are famous for having long lists of rules and regulations that residents and homeowners must follow. The first thing you’ll need to do is to check those rules and regulations as well as the association’s bylaws to be sure you can rent your property out. Some communities won’t allow it, or they’ll ask buyers to wait a year or two before they can rent their property. Other communities will limit the number of homes within the entire association that can be used as rentals, so you may find yourself on a waiting list. Don’t buy a home without being sure you can rent it out.
You’ll need to share all the rules and regulations with your tenant. When you’re signing the lease, make sure you include a copy of those rules and regulations and double-check your lease agreement so you know it reflects what’s required.
Follow Up on Violations
You want to be aware of any violations that the tenant incurs, and it’s important to hold your tenant accountable for paying any fees or solving any problems. If your tenant is routinely receiving violation notices because of weeds or overgrown bushes, consider hiring a landscaper and then charging that cost back to the tenant.
If you see a lot of notices for cars illegally parked or dog messes not being cleaned up, you’ll have to address these issues with your tenants and make sure the fees are paid. Again – include information about this in your lease agreement.
Buying an investment property in an HOA can be a great idea. They are usually new, in excellent condition, and attractive to great tenants. Just be aware of the unique challenges, and be prepared for changes in bylaws and additional assessments.