HOA...Like or Dislike?

Question

I thought this would be an interesting question for people to weigh in on:

For residential properties, do you prefer an HOA with a fair fee ($100/mo.) or would you prefer no HOA?

Jon Holdman · Answer

I'd never buy a rental property with an HOA.  I don't think I'd buy a property with an HOA period.

HOAs are uncontrollable partners.  Just because the HOA fee is reasonable now doesn't mean it will be in the future.  You can count on having special assessments at some point because HOAs, like any property, will have big bills they have to pay.  If its your property, you have some control.  With an HOA, you have limited control.

HOAs can also make rules that make your life as a landlord difficult.  Restricting advertising.  Screening your tenants.  For that matter, completely banning renting.

Account Closed · Answer

I just joined BP so  I wanted to contribute.

Many of my arguments against HOAs have been presented above so I'll try to make this as short and direct as possible.  My perspective is that of an investor/owner in condos.

I own/have owned units in lower income and middle income complexes.  I have found that it is somewhat rare to have an effective board- which makes having units that are under an HOA troublesome.

The lower income complex boards never want to spend money (even when they have to) and this results in a tremendous amount of deferred maintenance.  This causes values to depreciate and forces large HOA dues increases after a period of time.  In addition, getting the HOA to address and pay for HOA-related issues that directly affect your unit (bad foundation, chronically leaking roof, crumbling wingwall) is a time-intensive, often fruitless process.

The problem at the middle/upper-middle income complexes is that you still have people on the board who have no business directing a management company and each member fights to get what they want and not necessarily what is best for the complex.  You get situations where the landscaping is magnificent but the HVAC repair bills are through the roof since the board consistently failed to replace 30 year old failing equipment.

As an aside, many of the older properties have utilities paid out of the HOA.  While there can be some cost savings in terms of a lower electric rate, for example, people just do not care about conservation- especially the tenants who never have to pay the bill or see the financials.  An example of this is 4X avg. water bills in lower end complexes where 4 people live in a 1 bedroom unit.

At the end of the day, everything has a price.  Like junk bond buyers chasing yield, residential investors chasing out-sized returns occasionally venture into the rental-condo maket - typically lower-income units, since it's an area of the market where owner-occupied demand is so low that you can buy the unit cheap enough to make sense.

In my opinion, with older lower-income bills-paid properties you have to practically pay nothing in order to be comfortable with the risks.  In some extreme instances, the units aren't worth taking for free.  With middle income units, owner-occupied demand is usually sufficient enough to make the purchase price prohibitive for a rental-investor.

Paul B. · Answer

Interesting question, because not only do I live in a neighborhood with an HOA, I've also been the president for the last two years (and the treasurer for two years before that). It's sort of a "keep your enemies closer" thing...

I have always worked to ensure that the HOA does not become one of those HOAs you read about in the paper...telling people that their house is the wrong shade of white or that their grass is a sixteenth of an inch too high.

But, I do think HOAs serve some purpose with respect to maintaining aesthetics. I know some will say, "I can be trusted to keep my own house nice, thanks," and I certainly get that, but I can assure you that not everyone runs their lives the same way. And moreover, if someone doesn't want to live with an HOA, they shouldn't buy a house in an HOA neighborhood. Pretty simple...

But that wasn't the question...the question was how desirable is it to have an HOA over your rental property. From my perspective, not very. First of all, as the owner, YOU are going to be liable for any violations that your tenant might make. I don't like being on the hook like that. Second, some places (like ours) don't even let you put a for rent sign in the front yard or anywhere on the common area. That presents a challenge. Third, as has been pointed out, some HOAs are looking to limit or prevent rentals altogether.

So, as much as I don't mind an HOA where I live, I probably don't want one in my business concerning rental properties.

George P. · Answer

I am in Maryland and unless the SFH house was built in the 1980's, it's impossible to find one without HOA. All townhouses and condos have it by default. In my experience, anyway.

Mitch Kronowit · Answer

HOA's make popular targets for ridicule, much like lawyers and American cars. In that animated film, Over the Hedge, we meet the quintessential HOA president, a middle-aged, self-important, nosy busybody who is talking on her cell phone, of course, while driving her SUV and telling a resident her grass is 2" high when the CC&R's clearly specifies 1.75" (or something to that effect).

Fortunately, I've never ran into such an individual at either of our two HOA's in nearly 3 decades combined. Like I said above, if you're considering buying in an HOA community, do your homework, ask questions, and make sure you have a contingency in your purchase offer that states "upon satisfactory acceptance of the CC&R's" since most Realtors and agents never seem to know what's in them, probably because they were never given or requested a copy.

Account Closed · Answer

I avoid properties with HOA fees or other covenants.  There are way to many issues that can come up.

Mitch Kronowit · Answer

HOA's are like people. Some can be very helpful and some you just want to strangle.

Our rental condo is in an HOA with a monthly fee of $317 (that's about average for our area according to my unscientific poll). They can be a little annoying at times, sending me letters complaining that our tenant is doing this or doing that, but for the most part, they're helping me keep an eye on the place and preserving the property and rental values of the community. They also help us get great discount rates from contractors, such as plumbers, by referring a large amount of customers their way. I would hate to see what a high-density residential complex would look like without an HOA.

As for SFR's, the only one we have with an HOA is our own residence. Except for the issue of having to get their approval for architectural changes to our home, they're practically invisible. Besides, they prevent some yahoo from moving in and installing a chain-link fence around his front yard or painting his trim purple. The dues run about $110/quarter and it mostly goes towards landscaping and maintenance of the common areas, i.e., slopes and open land.

Now, I have heard horror stories with HOA's, but have not had that negative an experience with either of our two. When shopping around a community with an HOA, I introduce myself to any residents I see and ask them a few questions about their experience with their HOA. I ask them things like how difficult is the HOA to deal with? How quickly do they take care of repairs to the common areas? Are they really nosy in your personal business or do they stay out of the way unless truly needed? Would you fire your HOA if you could?

Joshua Dorkin · Answer

I'm with Jon.  I learned too much from a personal experience dealing with HOA insanity in a condo of mine.  Unless I run into some kind of absolutely screaming deal, I'm running far from any property with an HOA.

Dale Osborn · Answer

I would stay away from HOA's as any time you put money into someone elses pocket there is an opportunity for power trips and greed to take the money and run leaving the residents in a tight spot. I prefer to pay my own costs and expenses. Those who like the free rides - are probably counting on having social security income for their retirement.

George P. · Answer

I personally find $100/mo a rather high fee.
Unless you get perks for this much - pool, tennis court, playground.

HOA...Like or Dislike?

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