Real Estate Investor · Westminster, CO · Member since 2014 · 201 posts · 74 votes
I am wondering if anyone else is seeing that some rents for condos are really high and some are really low for comparable units in the same complex and that these differences are driven by the concept that the renter will "pay" the HOA fee. I am not sure if the owners are having the renter pay the fee directly (sounds risky to me) or if they are providing a separate bill for the HOA fee or rolling that into their monthly rent.
Does anyone see this happening? If so, how is the landlord selling this concept to potential renters? Do renters push back on the fee? Is it customary in Denver?
I am evaluating a deal and it will make all the difference in terms of positive or negative cashflow.
For my rental property I do use the monies from rental income to pay for HOA fees. However I just add it on top of what I would normally charge for rent. If the HOA fee increases I'll simply increase the monthly rent once its up for renewal. This could be the wrong way of doing it but, it seems to work for me. I personally haven't had any issues with it. I disclose up front that a monthly HOA fee is added on to their rent.
Do you have to disclose that your are adding the fee? Couldn't you just figure out the cost for the fee and adjust your rent accordingly?
For my rental property I do use the monies from rental income to pay for HOA fees. However I just add it on top of what I would normally charge for rent. If the HOA fee increases I'll simply increase the monthly rent once its up for renewal. This could be the wrong way of doing it but, it seems to work for me. I personally haven't had any issues with it. I disclose up front that a monthly HOA fee is added on to their rent.
Do you have to disclose that your are adding the fee? Couldn't you just figure out the cost for the fee and adjust your rent accordingly?
Include expected HOA fees, property taxes, insurance and an additional maintenance $ amount (to protect against certain repairs the HOA won't pay for) in rent formula. If the #'s work after including all expenses, then the #'s work. If they don't, they don't.
As a MD condo landlord, I just build HOA fee into my expenses and has no impact on what I can charge for rent. I don't see how someone could tack that fee on to raise the rent above market rate and convince renters to live there. You can advertise the fees however you want, but the place will only rent what the market will bear, and if its over that amount, then people will go elsewhere. Let's say there was a rental building next door with identical comps: What would stop them from going there instead to avoid paying those fees? Has that other listing been up a while? Could be a delusional landlord who will never be able to rent that unit out... Maybe they should add the property tax bill onto the monthly rent while they are at it:)
Also, you need to account for future HOA increases in calculating expenses. If the assessments go up in 2 years, you might not be able to raise rent by an equivalent amount if market rents haven't risen accordingly, leaving you stuck with reduced cash flow.
I haven't had an issues. However my area is in a population boom, certain areas have increased in population 250 percent in a year. Currently not enough rentals to go around.
I own a dozen Denver Metro rentals with HOA fees. I pay the HOA fees and would not even consider having the tenant pay the HOA fees. That is the standard practice in Denver, to do otherwise would be deceptive and unprofessional imo.
@Bill Coleman I've never seen HOA's paid by tenant, although I'm sure some people do it that way. In the end the tenant looks at money out of pocket.
If you are looking at comparable rents but can't tell how they are doing it, the only safe way is to assume HOA is part of the quoted rent amount unless you see the ad for the property and it says otherwise. Anything else would be a recipe for failure.
Thanks everyone. It seemed really strange when I found a couple listings where they added the HOA fee after the fact. My inclination is to include it in the rent. But having HOA separate makes it difficult to determine the going rate for a particular area because you never know if the landlord is including it or not. And, for the record, I would never ever trust that my tenant would pay an HOA fee. That's why you are a renter- so you dont have to deal with all the chores of ownership.
I will keep digging in and try to find more comps, trouble is that the area is just being built out now so there are very few comps.
@Bill Coleman I was doing some of the same research you are doing and i think you've gotten good advice form the other posters. Ill just second it by saying some HOA's have the power to put liens or your condo for missing fees, so you should always CYA by making sure they're paid. The best way is to do it yourself