Can you still get a good deal on a property with an HOA?

Question

Just wondering what experiences have been for those who have bought rentals with an HOA. Any positives experiences that were unexpected would be much appreciated too.

D.J. M. · Answer

@Matt Davis it depends, due diligence (DD) on the front end is key. Take a look at the rules to see if they are basic or overly invasive. Find out what the assessments have been in the past, have they remained steady? Look at the association’s financials, do they have sufficient cap exp reserves which would reduce the likelihood of a sudden increase/special assessment. What is the association responsible for as far as common areas, amenities, services, insurance? Condo association fees are usually higher than homeowner’s/neighborhoods because there generally are more common areas/responsibilities. A few more DD areas, does the board have a lot of turnover, any prior or current litigation, and reputation of the management company. Talk to residents if you can, real estate agents typically also have a good sense of good HOAs.

Donald Robers · Answer

@D.J. M. Also check the HOA rules to be certain that using your property as a rental is even allowed.  Many HOA communities  limit the number of rental units either because a renter is viewed as less committed to the community than an owner or due to the reluctance of some banks to finance property in high renter-to-owner ratio communities.

Be especially careful if you plan to do short-term vacation rentals or something like AirBnB.  Otherwise cooperative HOAs sometimes draw the line at these "transient" rentals.

Kiley N. · Answer

@Matt Davis

@D.J. M. has some good points for due diligence.  An HOA property could be thought of as a separate asset class from your typical rental property due to the different risks associated with it.  As with any asset class, there are good deals to be had but they should be measured against the added risks and uncertainty.

One basic way to sum up HOA investing is:

Positive:  Other people are handling the budgeting, capex, maintenance, and rules for you.

Negative:  Other people are handling the budgeting, capex, maintenance, and rules for you.

A lot of variables can go into who those other people are and how experienced/qualified they are to do the above for you.

Bill B. · Answer

99% of houses built in the last 20 years in Vegas have Hoas. The upside is the neighborhood being kept up a little better. The downside comes when you’re paying hundreds or thousands a month in HOA (between all the properties) hoping to be left alone. Or getting a complaint like “please remove watering can from driveway...”. ‘Trash can visible from road...”

Matt Davis · Answer

@Albert Hasson thank you! Good to hear there is a potential upside as well.

Albert Hasson · Answer

Funny, every single one of my properties is in a HOA and I love it.  The monthly fee goes towards common area landscaping as well as  enforcing rules that keeps the neighborhood nice and uniform, lawns mowed and yards weeded, houses painted, trash cans behind gates, cars parked in appropriate spots, etc.

When I drive my neighborhoods I never have to worry about a trashed house next to my property, a car parked on the lawn next door, homes in disrepair and in need of paint, etc.

The tenants I attract expect their neighbors homes to be just as nice as mine.

No downside to HOA’s in my opinion.

Matt Davis · Answer

@D.J. M. Thank you, very helpful information, have been routinely excluding properties with HOAs in my deal search just because the major cash flow hit, but will incorporate this advice and maybe start looking at some properties with HOAs as long as numbers work out and HOA governance/regulations are favorable

Jermell Shavers · Answer

@Matt Davis. Don’t waste your time on a property with an HOA because when they assess you will have an unexpected bill or whatever code they are trying to keep up. I have a HOA issue as we speak which I’m getting out it’s time to go back to SFH for me. If you do get the property with an HOA just know it isn’t fixed over time it will increase

Can you still get a good deal on a property with an HOA?

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