Introduction To Residential Investment Property Purchasing in An Association

Purchasing a Residential Investment Property in an Association

In the last post I left off with discussing pre 1978 properties.  Don't rule out these properties just because of the potential for lead paint.  Spend the money to get the property tested, and rest easy knowing you don't have to deal with it!

Many investors and REALTORS are under the impression that owning rental property in a homeowners association is a good thing.  Although it's not always a bad thing, it does create some additional things to consider.  Does the HOA allow rentals?  What do they require from the tenants and the landlord?  Will they work with a property manager who manages your home?

You'll also have to remember that you have dues monthly, yearly, or quarterly.  In our area it's customary that the landlord pay the HOA dues.  This equates to less of a profit margin and could mean more headaches.  In my experience HOA's are not always  "tenant friendly".  Many times they know the rentals in the area an they will pay closer attention than they do with other property owners.

When considering the HOA dues at the time of purchase also consider the fact they will increase.  In many years of dealing with HOA's I have never seen a decrease in dues.  You would hope the increases are inline with rent increases but that's not the case.  Many HOA's require yearly increases despite what the rental or sales markets are doing.  I have also seen very expensive special assessments in cases where the HOA did not have the funds to cover a major project or major damage.

There are some benefits to an HOA, many times they maintain the exterior of the building, roof, common areas, etc.  They also offer amenities that may not be available outside the HOA.  Pools, conference room, workout facility, rec room, etc.  If your area calls for these types of amenities and people are willing to pay to get them, then it's a viable option for an investment property.

Make sure you ask questions of the HOA, review the financials and governing docs, discuss their policy for landlords and tenants, and crunch the numbers before you purchase a rental property.

Sincerely,

Daniel Muldoon