As a Norfolk rental property investor, the odds are that the subject of buying a property with a Homeowners Association (HOA) will come up sooner or later. The same is true if you invest in single-family properties built in the last 20 years, where Owners Associations are very common. The most vital thing about buying a property with an HOA is that they contain both positive and negative aspects.
The additional oversight and restrictions of owning a property with an Owners Association can be both an advantage and, sometimes, create a headache or two. So, before you invest in a rental with an Association, think about these upsides and downsides. After that, you can settle on the choice that is ideal for you.
To start with, you must learn what an HOA is and what they do. HOAs get a lot of criticism and bad press, not all of which is merited. This is on the grounds that HOAs exist largely to help maintain certain standards within the community. While the governing boards of some Associations are formed of community residents, others are overseen by the community’s developers; some have professional management, while others do not.
The entire Owners Associations have governing documents known as covenants, conditions, and restrictions (CC&Rs), which spread out the rules and requirements for property owners in the community. Once you get a property with an HOA, you immediately become a member and are obligated to pay any related Association assessments. These assessments are utilized to maintain common areas and any other amenities the community may offer, such as parks, recreation centers, etc.
No two Associations are similar, so it is vital to do your research and examine the specific HOA documents for any property you want to buy.
Because HOAs can vary extensively, it is possible to purchase a single-family property with an HOA that accompanies various advantages.
For instance, some HOA communities offer beautiful, private amenities such as swimming pools, parks, playgrounds, tennis courts, or a recreation center or gym. Offering a renter access to these amenities (if allowed by the governing documents) can be a big selling point for a rental house, something that may make finding and keeping tenants smoother.
One more wonderful bonus of some HOAs is that they may provide a common area and sometimes even front yard maintenance. Contingent upon the community, they might incorporate trash removal services or snow removal. Having the HOA perform even a few maintenance tasks can lessen the load of a Norfolk property manager.
Many people like living in communities with HOAs because they tend to be cleaner and maintained better. Not only is this better for property values, but it can also be a big draw for prospective tenants.
Of course, there are also a few potential disadvantages to owning a rental property in an HOA. Most of the time, homeowners who are unhappy about their Association feel that way because they’ve either decided they don’t like (or don’t want to follow) the community rules or don’t like paying their assessments. However, the biggest concern for property investors is that sometimes HOAs will place restrictions on your ability to lease the property you own.
As an instance, multiple Associations are now prohibiting owners from using their investment properties as vacation or short-term rentals. Some HOAs even restrict or prohibit long-term rentals in the community. There may also be rules about how long the property owner must occupy the house before renting it to others.
An HOA can also lead to headaches for rental property owners by requesting special assessments for unplanned costs or requiring property owners to conduct additional tenant screening. These are only a couple of cases, but because every HOA is different, you may encounter all sorts of restrictions, huge and little. Association assessments will take a chunk out of your cash flows, and it’s not always possible to raise the rent enough to cover the amounts fully.
Suppose you do decide to acquire a property with an HOA. As a result, you’ll also have to budget extra funds for special assessment costs, which don’t come up too often but can be large amounts, especially if the community is older and in need of repair or replacing big-ticket items.
Ultimately, deciding whether to buy a single-family rental in an Owner Association depends on whether the pros outweigh the cons. It also depends on the specific community and HOA and how likely the governing board is to meddle in the leasing process. This makes it essential to talk to other property owners in the area, read the documents carefully, and know exactly what you are getting yourself into. This is good advice for any purchase, especially when buying a property with an Owners Association.
Would you like a local expert’s advice on a property or community? We can help! Contact Real Property Management Hampton Roads to learn how we help rental property investors like you find profitable investments.
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