Hi,
I was wondering if anyone buys property in HOAs and if you do, is there a certain threshold HOA annual fee amount that is ok before it becomes something that you "notice"? For example, i have a home where the HOA annual fee is $350 a year and since i bought the property when the interest rates were low enough the numbers work, at least for me. Some homes that I am seeing these days appear to have very high HOA fees like $650 or $700 per year in some communities. Assuming the numbers overall still 'work' for you, is there a number for the annual HOA fee that you live with before it makes you think about it?
when i say it makes you think, I'm looking at it from whether you want to sell the home later, does the high HOA make the home less attractive to buyers etc.
Thank you in advance!
James
Any HOA makes me say no.
HOAs are brutal. I stay away from them because they always go up over time and it's hard to know where the $ is going, especially if the management company isn't transparent. Beware!
James,
HOA fees are relative....usually. Typically the board adjusts the fees to reflect current maintenance and the future needs. Asphalt parking lots and "Dutch Lap" shingles are a huge and predictable expense.
Many states require an engineering study, to determine the useful life of elements of the project. They will have a pretty good idea about when the shingles will need to be replaced. With that study, naive board members can make informed decisions on behalf of the community.
I'd say the more important issue is who is on the board and do they have business experience. A poor board can ruin the value of your investment. Regardless of how high the fees seem to be.
When you see investors drop out of condo/townhomes because of HOA that means only those want to live there need to be concerned. In our area often around $1K a month. PA, CA it is easily $1,5-2K a month rip off.
Hello James,
All my houses are in HOA and I really don't mind having it. Mine are anywhere from $200 to $600 a year but I will be probably be ok with something as high as $1200 a year. In my experience HOA is usually a problem at the apartment complexes where you have $500/$600 a month in HOA fees and depending on what Cap-Ex investments they need to do it can go even higher. Based on how much your HOA is I assume you're talking about a single family home in a suburb subdivision. In those scenarios in my opinion is actually good for you as an investor long term because they are going to make sure the neighbors don't do anything to hurt the desirability of the subdivision, and making sure the values are going up.
Unless you want to do a short term rental, HOA is actually an extra eye, on your property and on the area, that you have as an investor.
Good luck in your investing.
Hi,
I was wondering if anyone buys property in HOAs and if you do, is there a certain threshold HOA annual fee amount that is ok before it becomes something that you "notice"? For example, i have a home where the HOA annual fee is $350 a year and since i bought the property when the interest rates were low enough the numbers work, at least for me. Some homes that I am seeing these days appear to have very high HOA fees like $650 or $700 per year in some communities. Assuming the numbers overall still 'work' for you, is there a number for the annual HOA fee that you live with before it makes you think about it?
when i say it makes you think, I'm looking at it from whether you want to sell the home later, does the high HOA make the home less attractive to buyers etc.
Thank you in advance!
James
You understand that complex with two floor setup would be more expensive HOA than side by side, right ?
Also HOA is actually would rise following inflation because they follow labour cost.
In Waikiki Hawaii same setup but different built year of complex could have $400 to $2,000 HOA fee ranges, all depends on what service they offer. For me if I have to live there I would buy the top 10 cheapest one lol
It really depends on what it covers. I have condos and the fees for one are high based on the price of the unit (almost $400 a month), but that includes everything (heat, water and electricity).
Hi,
I was wondering if anyone buys property in HOAs and if you do, is there a certain threshold HOA annual fee amount that is ok before it becomes something that you "notice"? For example, i have a home where the HOA annual fee is $350 a year and since i bought the property when the interest rates were low enough the numbers work, at least for me. Some homes that I am seeing these days appear to have very high HOA fees like $650 or $700 per year in some communities. Assuming the numbers overall still 'work' for you, is there a number for the annual HOA fee that you live with before it makes you think about it?
when i say it makes you think, I'm looking at it from whether you want to sell the home later, does the high HOA make the home less attractive to buyers etc.
Thank you in advance!
James
@Bud Gaffney@Janet Behm@Sam Shueh@Daniel Tanasa@Carlos Ptriawan@Steve K.@Account Closed
All, really appreciate the feedback. I've only lived in hoa condos where I am and it's not transparent in almost all cases and high fees, but thought that's just CA. I have investments out of state with and without hoas and have been ok with the hoas. I've been looking at Houston and see that hoas are getting high...and I mean like 650 and 700 for some of the new builds compared to 300 to 400 a few years ago, so was curious.
I've started "noticing" them along with the significant increases in insurance too.
Thank you all!
James
HOA fees can vary widely based on factors like amenities, services, and community appeal. For some buyers, the allure of desirable amenities like pools or gyms justifies higher fees, while others may be more cautious about the potential costs and restrictions. Typically, fees around $350 are deemed acceptable, but beyond that, buyers tend to scrutinize the value provided by the HOA. Factors like the community's overall appeal, the financial impact on housing costs, potential future fee increases, and the level of rules imposed by the HOA all play a role in shaping a buyer's perception. Generally, fees exceeding $650 or $700 per year may start to raise concerns for some buyers, underlining the need for a clear cost-to-value proposition.
@James Kim
I read your post as having 2 real questions:
1) Is there a monthly dollar amount paid to the HOA that would preclude doing a deal?
And 2) Would the existence of an HOA make the home less attractive to buyers?
In answer to #1, I think every deal stands on its own so if the net after all expenses meets your goal...then there is not necessarily a set monthly dollar amount to consider. HOWEVER , I'm not sure that this may be the only question to consider. Another big issue is one of "control". Aside from cost, the reason many investors avoid HOAs is the level of control they exert over your property, and as a result, the control you lose as an investor owner. Most HOAs have the ability to change its dues annually (unaccounted costs). Most HOAs will govern the tenants use of the unit more strictly than you might (I've had many letters from overzealous HOA officers enforcing bylaws and threatening fines). Most HOAs will dictate the type of exterior repairs and maintenance that is allowed (paint colors, lawn ornaments, timing for lawncare). Did I also mention that most HOAs are empowered to require "special assessment fees" for common expenses that you probably havent accounted for in your proforma? (Roofs, landscaping, parking lots). As someone who has lived in HOAs, there was alot I loved about it...but as an investor owner, maybe there is a deal worth doing but do I would only do so with eyes wide open concerning the above risks.
As for what may be more attractive to a potential buyer, it depends on who you'd project selling to. Many investors will have concerns buying your property for all of the reasons above...so it is possible that the potential buyer pool is limited to only owner occupants. That said, I've also known of some master planned communities (especially in Florida) that are seen as extremely desirable by owner occupants expressly because they do seem to have a really well run HOA. Perhaps that demand more than makes up for the lack of owner-investors...
Alot to think through - wish you luck!
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
Keep in mind HOA and Condo association are 2 totally different things. Similar, but very different. Like a car vs truck.
I don't do condo associations, EVER.
I think it really depends on the property and the person. Where I live in Scottsdale Arizona, the typical HOA for a condo is $200-$400 a month. But for a house will range from $0-$200. I think if the owner is specifically looking for a condo, they'll expect a high HOA. But I feel like a lot of owners looking for a house typically don't want an HOA at all, not only do they dislike the fees but they dislike the rules.
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
Keep in mind HOA and Condo association are 2 totally different things. Similar, but very different. Like a car vs truck.
I don't do condo associations, EVER.
oh so what you meant by HOA is actually single family HOA complex.
I went out of my way to avoid HOA. They can be quite pricey and go up every so often. If the numbers work and you aren't doing MTR or STR AND the chance of them banning LTR are very low, then sure. But as a house hacker using STR and MTR, wasn't worth the risk even if the HOA was low and currently allows rentals IMO. Unless your market is heavily reliant on rentals like in a vacation town.
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
Keep in mind HOA and Condo association are 2 totally different things. Similar, but very different. Like a car vs truck.
I don't do condo associations, EVER.
oh so what you meant by HOA is actually single family HOA complex.
The governing law's to various association entities is under common interest communities. If you dive into the assorted law's and regulations on such you will find there is very big differences between condo associations and HOA's.
For example, a "true" HOA is where you own your individual unit, and are a member to the association of home owners and the community. Vs in the condo, you don't actually own your unit, you own a share of the entirety, with a unit designation. That's why in those condo associations they can be up your tail-pipe with a microscope requiring to submit lease unto them for approval etc., you don't ever truly own your specific unit.
And in a true HOA, most commonly in Townhomes, if rental's are approved it's next to impossible for them to ever ban rental's, the process and votes needed is very hard to get. And if you own rentals in that HOA, each one is a vote. I have sat in an HOA meeting where I commanded 14 votes, in a room of 20 HOA members. So in function, I was a "super delegate" and I got to decide things.
MFH in vast majority of cases is organized as condo association, not true HOA. Most HOA's are Townhomes and SFH.
Townhomes seem to be organized as true HOA about 50% of time and a modified condo association other half, one with rule paralleling true HOA.
Keep in mind HOA is Home Owners Association, you can't be a Home Owner if you don't "own" your home. If you own a share with unit designation, you still just own a share.
make sense?
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
Keep in mind HOA and Condo association are 2 totally different things. Similar, but very different. Like a car vs truck.
I don't do condo associations, EVER.
oh so what you meant by HOA is actually single family HOA complex.
The governing law's to various association entities is under common interest communities. If you dive into the assorted law's and regulations on such you will find there is very big differences between condo associations and HOA's.
For example, a "true" HOA is where you own your individual unit, and are a member to the association of home owners and the community. Vs in the condo, you don't actually own your unit, you own a share of the entirety, with a unit designation. That's why in those condo associations they can be up your tail-pipe with a microscope requiring to submit lease unto them for approval etc., you don't ever truly own your specific unit.
And in a true HOA, most commonly in Townhomes, if rental's are approved it's next to impossible for them to ever ban rental's, the process and votes needed is very hard to get. And if you own rentals in that HOA, each one is a vote. I have sat in an HOA meeting where I commanded 14 votes, in a room of 20 HOA members. So in function, I was a "super delegate" and I got to decide things.
MFH in vast majority of cases is organized as condo association, not true HOA. Most HOA's are Townhomes and SFH.
Townhomes seem to be organized as true HOA about 50% of time and a modified condo association other half, one with rule paralleling true HOA.
Keep in mind HOA is Home Owners Association, you can't be a Home Owner if you don't "own" your home. If you own a share with unit designation, you still just own a share.
make sense?
hold on a sec, it seems what you described is a co-op ; co-op and condo HOA is different ; the unit is still belong to us permanently.
I went out of my way to avoid HOA. They can be quite pricey and go up every so often. If the numbers work and you aren't doing MTR or STR AND the chance of them banning LTR are very low, then sure. But as a house hacker using STR and MTR, wasn't worth the risk even if the HOA was low and currently allows rentals IMO. Unless your market is heavily reliant on rentals like in a vacation town.
This isn't how HOA's work.
HOA has to vote on increase, it's not arbitrarily done by some invisible hand. There is a board elected to position by the home owners in community. And often a professional management company hired to perform day-2-day tasks. The PMc has no power to change fee's or change rules, nor do board members. It's via HOA vote.
I have operated the politics' of such for many years. I have never seen an HOA flip rental approval, not once ever. I have seen the rules stating a density cap % happen, because I lobbied and voted them in. It makes sense and yes, I like monopolies when I hold the monopoly, lol.
@James Kim I love HOA's!
I have no idea why people trash talk free caretakers and another entity taking over 50% responsibility of things, arguably the most annoying 50%.
I use simple ROI analysis, is the HOA fee and Return On Investment?
$325 mnthly fee, ok, what's it cover? All lawn and snow, ok, that would cost me at least half that to hire on my own. And trash, ok, that's another $35/$45mnth I don't have to pay. And all exterior maintenance and insurance's, and and and. Well done, it would cost me a lot more to do it on my own.
And the most important item; Can I SELL this feature, MONITIZE it to a tenant? 99% of time it's a resounding YES!.
So in fact HOA cost's me NOTHING, and if anything, is ADDED PROFIT's.
I have yet to experience a tenant who said "awh shocks, I was hoping I could mow the lawn every week....".
So yeah, I LOVE HOA's. I even like the "Karen's", ya just gotta know how to make em an ally vs enemy. Tenant's are correctly conditioned to like in a conforming manner which is best for my property condition.
I guess it's all one's experience. I am result's focused, so I love HOA's.
Best
sometimes HOA is the best on special situation like condo for STR , HOA helped a lot
Keep in mind HOA and Condo association are 2 totally different things. Similar, but very different. Like a car vs truck.
I don't do condo associations, EVER.
oh so what you meant by HOA is actually single family HOA complex.
The governing law's to various association entities is under common interest communities. If you dive into the assorted law's and regulations on such you will find there is very big differences between condo associations and HOA's.
For example, a "true" HOA is where you own your individual unit, and are a member to the association of home owners and the community. Vs in the condo, you don't actually own your unit, you own a share of the entirety, with a unit designation. That's why in those condo associations they can be up your tail-pipe with a microscope requiring to submit lease unto them for approval etc., you don't ever truly own your specific unit.
And in a true HOA, most commonly in Townhomes, if rental's are approved it's next to impossible for them to ever ban rental's, the process and votes needed is very hard to get. And if you own rentals in that HOA, each one is a vote. I have sat in an HOA meeting where I commanded 14 votes, in a room of 20 HOA members. So in function, I was a "super delegate" and I got to decide things.
MFH in vast majority of cases is organized as condo association, not true HOA. Most HOA's are Townhomes and SFH.
Townhomes seem to be organized as true HOA about 50% of time and a modified condo association other half, one with rule paralleling true HOA.
Keep in mind HOA is Home Owners Association, you can't be a Home Owner if you don't "own" your home. If you own a share with unit designation, you still just own a share.
make sense?
hold on a sec, it seems what you described is a co-op ; co-op and condo HOA is different ; the unit is still belong to us permanently.
co-op, condo and HOA are all 3 different. Condo associations operate most like a co-op, and many times a condo association is a co-op.
I find most people have no awareness of any difference and just assume it's just different word's for the 1 same thing. There not, all different legal structures and implications.
In a true HOA, i find they work dang well, good ROI on fee's every time. And I retain control of everything that matters and that I want/need control of.
Co-op and Condo, totally different. Shared ownership makes for certain issues and loss of control.
@James Kim
I just don't look at HOA's, at all. The board can change rules at anytime. They just seem like such a hassle.
I never really saw these HOAs on the east coast, they are just not nearly as common as if you say go out to AZ. Keep in mind even with houses there are all kinds of HOAs, some mow your lawn, some police how you mow the lawn. Some have common area to maintain, some have very little to maintain. I belong to one HOA that owns common beach lot. Its nice it is there but the thing I don't like about the HOA is the non-stop complaining the renters are messing up the beach. No owner ever does anything wrong in the HOA.
@James Kim Run the numbers but expect that your tenants may be unwelcome soley because they are tenants. If you are in an area with all HOAs compare apples to apples on what is included in the fee and you are probably not going to see an impact if HOAs are common in the area. If they are not common where you are buying I would steer clear.
@James Kim
I just don't look at HOA's, at all. The board can change rules at anytime. They just seem like such a hassle.
Lol, no, an HOA board can't change the rules at any time, it requires votes.
@James Hamling really made a great point and I share the same thoughts. The right HOA can be a pro instead of a con.