I'm running the numbers on property in the Triangle area to purchase my first rental. It seams to me that HOA fees really hurt your monthly cash flow which is what I'm trying to focus on. I was wondering if any of you factor in things like a new roof and yard work as expenses you wouldn't have to set money aside to eventually fix/take care of and remove that from what you would normally set aside ie major/minor capex for homes without an HOA? For example, a property with no HOA would need a new roof that's $10k. Break that down that's a little over $40/month over a 20yr span. Lawn service would be another $30-40 a month. At an extra $80/month taken away from my capex, that would help mostly townhomes, in the area that's attactive with shops and good schools, look more appealing then the ~$140/month cash flow i would be looking at without that factored it. Just was hoping to hear some opinions from others who have similar experiences.
A lot of the townhomes don’t give you an option of no HOA. And typically i don’t think it includes the lawn maintenance, some might.
I mostly buy detached, and in that scenario HOA doesn’t include roof, so I look for low or no HOA.
HOA helps also on townhome like properties to avoid conflict between homeowners of repairs and such I suppose.
Thank you Yung. The townhouse I'm currently interested in is about $100/month and doesn't include a pool or common area. I don't want to assume on whats included however. I'm going to look into it today more when I meet up with the seller, but I was curious if what comes with an HOA is excluded from typical expenses reports otherwise noted when evaluating properties. I believe that strategy works, but could bite me if I don't long term hold.
I live in Raleigh (near NCSU) and am running into this HOA problem right now trying to find townhomes in the Raleigh area. Just wondering if either of you have figured out strategies since the original post to help offset the HOA eating your monthly cash flow. I am seeing many town homes with HOAs as high as $200-$250.
I have heard from a couple of local investors that 6-8% return is considered good in Raleigh- have you found that you are able to do that with HOA costs?
@Keith Boom you are thinking just like me when i started investing, but here is what i learned over the years that goes beyond just the numbers..
Most towhomes in Raleigh area have HOA and it can be $60-200 or even more. They do typically maintain the outdoors / landscaping, the exterior and the roof. However, if they don't have enough collected funds to cover new roofs or decks, they will just do a special assessment and you might get a bill for $3000 for new roof. So just because you pay HOA, that does not mean the cost will not go up or that you won't have to pay for anything else.
Mainly for that reason, i don't like HOA or townhomes as much as Single Family Homes.
Now for SFH. I actually don't mind paying a small HOA fees, like $20-40/mo. They typically make sure the neighborhood stays nice and clean and enforce the HOA rules so its much easier to rent the property or to even sell if the neighborhood looks nice. So it does impact your property value and the rentability.
Not a tax accountant but you might be able to deduct the cost of HOA on your investment so its not as bad to have some deduction.
I don't really care about the landscaping / yard maintenance as you typically have your tenants to be responsible for that, so i would not include that assumption your calculations..
Hope this helps!
@Emily Register , I haven't been able to find that which is major reason I haven't bought any townhomes so far. I have 3 properties now since started (~2016), and they are all SFH detached, with very low or no HOA (less than $25/mo). Happy to chat sometime if it's helpful.