How Many HOA's is Too Many HOA's

Question

I'm closing soon on my third condo in the greater Hartford area and am looking forward to adding to my portfolio but I'm wondering at what point I should pause on condo acquisition and not stack so many properties with the variable of all variables (HOA) on top of one another. I have friends who have dozens of condos and love them and some who have a variety among other things. Understanding the communities financials and budget are the first thing I look at, and here in CT we close with attorneys who also do that diligence. I suppose I just fear the day an assessment is levied or there is a drastic change in fees or the budget isn't handled well and the unit owners are stuck with those mistakes. I know those are the inherent risks with condo ownership but are there others out there who invest similarly that have found a way to mitigate some of that or at least come to terms/peace of mind with these hypotheticals?

Gary Striewski · Answer

I hear ya. After locking down this one I plan on going SFR and Multi. Two of the three condos have pretty buttoned up, large scale and reputable Property Management Companies with owners on both sides. That helps imo. And roofs/parking lots were done within the last two years on both. So hopefully no major CapEx for awhile but the third condo is the wild card. A little bit looser of a HOA and Property Manager per tenants, but their budget is in the black and I'll be quick to call out any funny business. I appreciate the perspective as always.

Gary Striewski · Answer

John Mocker · Answer

Gary,Our agency insures both Condo Units and Condo Associations. One of the advantages of CT for a Unit Owner is that the laws have been amended to put more of the Insurance claims under the Association. Of course that shifts the cost and it comes back in higher HOA fees. The big advantage is there is no back & forth on who's responsibility it is to pay for it. That caused delays, lawsuits, etc. I would suggest you review with your agent the actual bylaws of each association. Look for what the description of the unit is (where does your ownership begin, the bare walls or the studs...) and what you own inside (ie. fixures, cabinets, sheetrock, etc.). Then find out what the association is required to cover. You may own the sheetrock but they may have to insure it. Once you know what is your responsibility, then you can decide if you have enough coverage. I find, when I'm quoting on condo units, both owned and rented, that the limits seem to have been picked arbitrarily

Gary Striewski · Answer

Pros and cons on both sides that's for sure. I've had my attorney go thru each set of condo docs and the financials pretty thoroughly and major work has actually been done very recently before I joined so that's a bit of peace of mind. The x-factor tho like you mentioned is the unexpected and that's what I fear. Item X is needed for a building in the complex and we are stuck with the assessment. So long as the HOA is ran ethically I am ok with small increases and even slight annual bumps, we are voting to add another member to one of the HOA's and I plan on putting my name in the hat so I can be more involved and see it all firsthand. I appreciate the perspective. Thanks!

Kenneth Garrett · Answer

@Gary StriewskiThat is definitely one of the challenges of HOA’s where a capital project needs to funded and your fees go up or a special assessment is required for a couple of years. I like the idea that your property taxes are generally less as well as insurance but it generally gets cancelled out with HOA dues. I have numerous properties and some have small HOA’s, generally areas where there is a lake. The dues are extremely low. As long as it is managed well (HOA) I think it’s fine. I know investors who only buy condos to avoid big expenses you have with SFR. As long as it’s profitable I see it as a good strategy.

Filipe Pereira · Answer

This is the number one reason I will probably never buy a condo (never say never, right?). I'm very budgeted and the idea that one day I could come home, open my mail and see that the HOA that manages the complex I own a condo in forgot to replace the roof 2 years ago (random scenario) and now needs X amount of money right away terrifies me. I think the best way to hedge against this is to have serious money saved up so that the bumps in the road don't affect you. The other part of this is just mentally accepting that there will be things that you cannot control on properties you do Not have complete Financial control over. Heck, there are properties that we do have complete financial control over and things still come up on our radar from time to time. In terms of being proactive, I'd try to be as involved with the HOA as possible. But if you're buying condos all over Connecticut, that's pretty hard to do unless you have a very active property manager.