What are your thoughts on purchasing properties with high HOA costs? Reply below.

Question

Hello BiggerPockets Community,

I'm currently exploring opportunities in the real estate market and am keen to understand more about properties with high Homeowners Association (HOA) fees/expenses, accounting for a significant portion of expenses. This is a property that doesn't cashflow because HOA expense is 12-15% of the property's monthly income. Given the fluctuating nature of today's market, I'm particularly interested in hearing from those who have recently navigated this terrain.

• Specific Experiences: Have you recently purchased a property with high HOA fees? What was your experience like, and how have these costs impacted your investment strategy and overall returns?
• Market Dynamics: With the current economic environment, how do you see high HOA fees affecting the long-term value and rental potential of a property?
• Risk Management: What strategies or considerations have you found effective in mitigating the risks associated with high HOA fees?
• Advice for New Investors: For someone looking into properties with significant HOA costs, what advice would you offer based on your experiences?

I appreciate any insights, anecdotes, or advice you can share. Your experiences could be incredibly valuable for myself and others in the community considering similar investments,

- Fiz

Jonathan R McLaughlin · Answer

@Bob Stevens is right (of course) about the big picture. If you are buying HOA it depends on what the money is going to. A relatively high fee can be fine if it means the association is financial sound, spends money on needed maintenance when it’s needed and adds value.

The more common trap is not analyzing a low number and finding out you will be on the hook for special assessments, emergency repairs and general decline/disinterest

Bob S. · Answer

RE is about 1 thing, the numbers. So its irrelevant what the HOA costs are . If the number make sense buy it, do not overthink it .

Kevin Wright · Answer

Hi Fiz! This is a great question, and it's something that I find very relevant in my market (NYC). I think the name of the game is pricing in the total cost of ownership. Create your cash flow model and make sure that the higher HOA fees are priced in to your offer such that it would be on par with a similar property bearing lower HOA fee burden. Another thing to consider is that if these are temporary such as in the case of a capital assessment, find the present value of these increased costs and make sure that is deducted from the price of a similar asset in your valuation math.

What are your thoughts on purchasing properties with high HOA costs? Reply below.

3 Replies