HOA Fees and Rentals

4 Replies

How is everybody handling HOA fees with a rental unit? Are they included in the monthly rental or considered a separate fee in addition? Is there an industry standard? Does it make a difference if it's a condo vs a SFR in a neighborhood?

@Peter Hightower , you, as the owner, are responsible for the HOA fees. Investors don't explicitly pass them on to their tenants but rather implicitly factor them in because they factor that it when conducting their acquisition analysis. Market rent is market rent and that's all you're going to be able to charge. Hopefully, the HOA fees won't eat up all your cash flow.

You can include HOA fees in your rent if your area commands it. Just like you include the costs for water, sewer and trash if your tenant doesn't pay for them. I imagine market rent in a condo or "gated" community will allow you to included those fees in your rental amount. Nothing illegal about it. People rent their condos all the time, and I doubt if any of them are taking a loss because of the HOAs.

At the end of the day the Renter is the one paying the HOA. The Renter is paying for everything, no matter what it says on the Lease. If it's a separate line-item, the Renter pays it as a separate line-item. If it's included in the rent, the Renter pays it as part of the rent. So the only question is, does the Market Rent for that location and Type of Unit cover the HOA, plus Debt Service, plus whatever other Expenses need to be paid.

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Because if it doesn't, the Landlord is in for a world of hurt!

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The other thing I wanted to mention is, you might consider getting yourself on the Homeowner's Association Board. If it's allowable, and if it's not too far away, and if it's otherwise not too inconvenient. That way, you can at least have some input to how the money is spent and how or when the fees change.

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The way you need to look at a HOA, if it's done correctly, is as an enforced Maintenance and Capital Reserve expenditure, which are moneys you'd have spend one way or another anyway. The HOA, like Maintenance, covers grounds keeping and fixing toilets. And, like Capital Reserves, a part gets squirreled away so that in 15 years you can put in a new roof.

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Again, if it's done correctly. Which is why you have a vested interest in being on the Board, or at least attending meetings. If you can.