Multifamily 4 plex investment in AZ - with HOA - how risky?

Question

I have been reading some of the earlier posts and there is lot of reluctance here in buying a 4plex WITH HOA. I have seen properties with HOA tend to be selling for lower price but then I'm buying for lower price as well. I'm looking for some of the key things I should be looking for in this property WITH HOA as I'm about to close it in couple of weeks??

Or is it something that I should walkaway as I still have time with BINSR??

Any insight or guidance or list of dos or donts would be really helpful.

Thank you,

Or is it something that I should walkaway as I still have time with BINSR??Any insight or guidance or list of dos or donts would be really helpful.Thank you,

Doug McVinua · Answer

@Vlibhu Arya HOA on a 4-Plex in and by itself is not a deal killer in its self. What does the HOA do? Who controls the HOA? Is the HOA properly funded? What are the CC&R's? Lots of questions before a qualified answer can be given.

HOA's in Arizona are common and in many cases very good at maintaining nice clean properties in a conforming way. A rouge HOA can be trouble and one to walk away from, so the answer depends.

Not trying to confuse or not answer your question but the topic really needs to be investigated before a qualified answer can be provided. I live in an HOA and love it! I manage many properties in HOA's and most are good a couple are a pain in the behind.

Happy to answer questions, investigate, etc.

Vibhu Arya · Answer

Thank you for your responses. I've requested for the CC&Rs /HOA docs and currently waiting for them.

Dan Rowley · Answer

I don't think you should via HOAs as purely negative or just additive cost/rules as some may indicate here.  If they are run effectively they can serve to protect your investment (and help retain/attract tenants).  I've seen (probably you have too) the non-HOA duplexes or fourplexes that are overrun by weeds and the siding is peeling and there is trash in the yard or maybe a car up on blocks...

You'll want to check and see what the HOA covers becuase often it's roof/exterior paint, etc. so you'll need to either pay for these now or pay for them later and if included in the HOA, then you're really just setting aside reserve funds for these inevitable repairs.

Kenny Dahill · Answer

Hi @Vlibhu Arya, I'm from Arizona and the downside here are majority of the areas for quads aren't great.  Borderline C/D class.  However, in Arcadia-lite there are some quads that attract young B tenants.  What part of the valley is this property?

Real estate is about due diligence, not location location location.  You can check online for the HOA management company to see if they post that sites bylaws.  If not, you need to communicate with the seller because you definitely should not proceed with you don't understand the bylaws.

It's important to know what you pay for now but, more importantly, what you pay for in the future!  What common maintenance items might they charge every landlord a special fee to cover?

Vibhu Arya · Answer

Thank you for your insights. After reading through several posts here,  I understand HOA could be a big hassle.

BUT Most of the properties in 4plex complexes where we do not have HOA -  as I have noticed are in complete mess. So I struggle with the idea how difficult it would be attract decent (hassle free) renters.

I've asked for the HOA bylaws but haven't received one yet - will follow-up & let me see how it looks.

Thanks again,

Michael Randle · Answer

HOA adds a layer of complications that some people are not comfortable with. I myself am one of those people.

For instance, if you want to add some zero-scape or other curb appeal to your property, you have to get approval. Perhaps your HOA has some sort of rental restrictions in place. Covered parking and assigned parking spots for more money, approval needed. Also HOA's are another way your tenate can cost you money by them not following the rules, in the end YOU are responsible for everything the HOA says you have to follow.

This isn't to say that all HOA's are useless (they are lol), but I have seen some that provide for common areas like pools which would be great. They might have a collective negotiation with trash to get an overall cheaper rate, perhaps they provide maintenance for the lawn etc.

Unfortunately the benefits are far outweighed 95% of the time by the restriction, in both time and money, that are placed on a property owner any time they want to improve their investment. I have learned that HOA's mainly exist to tell me what I cannot do with my property/investment rather that contributing any meaningful addition or benefit to my investment.

Alec Granger · Answer

Vlibhu,

When investing in properties in HOA's it's really important to figure out the fees associated, this way you will be able to better estimate the actual cost of owning the properties. Also, depending on the HOA, there may or may not be regulations affecting when/how you can rent out the properties. It really depends on the individual HOA. Contact the HOA if you haven't already and try to determine what these rules and regulations are and how they will affect your usage of the property.

I hope this helped. Feel free to reach out with any questions!

Alec Granger

New Western Acquisitions

Multifamily 4 plex investment in AZ - with HOA - how risky?

Most Popular Reply