HOAs limiting number of rental properties
Madison County (AL) investors,
Just wanted to alert you to a recent development. We received our annual HOA dues statement for one of our SFH rentals. With the statement, there was a ballot to submit for HOA by-law revisions. The revisions including eliminating STRs (which aren't permitted by the city ordinance anyway without very specific qualifications/zoning), limiting the total number of rentals in the subdivision to a percentage, etc. They noted that all existing rentals were "grandfathered" in from any restrictions, likely to avoid a possible legal battle from the existing LTR owners.
As such, if you are buying an LTR in a subdivision with an HOA, make sure you check the HOA legal by-laws closely first before closing - this may become more wide spread in the future here.
@Michael S.almost all of the newer subdivisions have a 6 month/12 month minimum lease term in the HOA CC&Rs. I think you'll see most of the older (still active) HOAs without that provision attempting to amend the CC&Rs to include it.
@Steve Stinson - have you seen HOAs also putting a restriction on the number of properties in the subdivision that can be LTRs? That was a new one to me, and seems to be a dicey proposal. I get the STRs; I think the LTR restriction is very problematic.
@Michael S.No, I haven't seen that yet. I am familiar with an older townhome community that prohibits any rentals. I don't see how that would hold up if ever challenged.
#2 General Landlording & Rental Properties Contributor
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#2 General Landlording & Rental Properties Contributor
This nothing new. Many HOAs (not speaking about Huntsville specifically, but any where) already limit the number of rentals. Some don't allow rentals at all- LTR or STR. This is one of the things to keep in mind when buying a property that has HOAs, rules can change.
This is certainly not something new. Many subdivisions in Atlanta have started implementing this strategy to help deter institutional investors from buying properties in subdivisions that are at a higher propensity for becoming a rental community. This is a way for these HOAs to control the perceived long-term values of their personal residence.
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This is why I generally advise investors against HOA's and avoid them myself.
@Theresa Harris and @Tim Sharkey To clarify - it does appear to be NEW in the Huntsville/Madison area, as Mr Stinson validated with his comment above. I am aware that this may be very common for other areas of the country, as you have seen in your markets. But I have never previously paid close attention to HOA covenants for local SFH opportunities here in Madison county, and wanted to make other investors in this area aware to watch out for it.
@Nicole Heasley Beitenman - I think it can be case by case. We have a couple SFHs in HOA neighborhoods, and the HOAs have previously been a non-factor - if anything, they are keeping the neighborhoods looking nice, and the tenants for those properties have been great about paying rent and not causing problems thus far. But obviously I may be in for a rude awakening if the local HOAs here start limiting the number of LTRs, or start getting aggressive board members in the future. To be determined.
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Originally posted by @Theresa Harris:This nothing new. Many HOAs (not speaking about Huntsville specifically, but any where) already limit the number of rentals. Some don't allow rentals at all- LTR or STR. This is one of the things to keep in mind when buying a property that has HOAs, rules can change.
the high end subdivisions in MisSissippi specifically in Madison county do not ALLOW ANY rentals..
Even some of the HOAs in Jackson, MS don't allow any rentals. I was about ready to buy one there when I found out it couldn't be rented.
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It's beyond me why any investor would spend their money buying anything in an HOA controlled community.....
@Bruce Woodruff
My parents had a condo years ago and mom couldn't even put a small flag in her 3'x3' plant area. And forget painting the front door how you'd like. HOA's are the worst.
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Originally posted by @Michael S.:@Nicole Heasley Beitenman - I think it can be case by case. We have a couple SFHs in HOA neighborhoods, and the HOAs have previously been a non-factor - if anything, they are keeping the neighborhoods looking nice, and the tenants for those properties have been great about paying rent and not causing problems thus far. But obviously I may be in for a rude awakening if the local HOAs here start limiting the number of LTRs, or start getting aggressive board members in the future. To be determined.
I remember a BP podcast episode where the guest was dealing with a difficult HOA, so they joined the board to help influence their decisions. Might be a smart move if there's an opening!
