2% test and HOA fees

[Marti Stanford]

When first eyeballing properties with an HOA fee, do you pull that number off of the rent before calculating out for the 2% test or leave it in?

Especially with a condo, that number includes part of your possible capX costs, but it definitely effects the bottom line ROI

Which way do you find more beneficial to you and why?

[Taylor L.]

I'm normally a multifamily investor, but I'm closing on my first condo in a few weeks. I chose to get more detailed in my underwriting, and break out all of the expenses. The HOA will cover some items, yes, but you'll still have plenty that isn't covered by them.

Not all HOAs are created equal. Some do nothing other than mowing and exterior maintenance, others handle everything outside except electricity. 

The 1% and 2% 'rules' are just for really rough approximation. In this case you'll benefit from getting more detailed. Just be careful that you don't massage the numbers to make them look like they work. 

Also don't forget the possibility of special assessments.