Rentals with high HOA

7 Replies

What are you thoughts on buying properties with high HOA and renting them out. Any success stories with good cash flow? I live in SoCal and HOA in some areas is upwards of 500 per month. I want to buy a small multi family and house hack. Not sure if I would have a positive cash flow at all with mortgage

@Shalini S.

This is why I generally don't invest in HOA properties. The HOA fees are cash flow killers. You also need to research the HOA management. Are there new projects coming up where the fee is going to increase for a special project?

@Shalini S.

Also need to be careful because some HOA's have rules on how many houses need to be owner occupied. If they are at or over the limit, you might not even be able to rent to out.

@Shalini S. That $500 can buy you a lot on your mortgage. You mentioned you want to buy a multifamily and house hack-a multifamily shouldn't have HOA fees as that is owned outright by 1 person (duplex, 6 plex, small apartment building-with one owner, not one owner per unit. With HOAs you also have the problem that they can restrict the number of rentals at any time and some are not well run so you get extra assessments.

@Shalini S. Buy a duplex. You can go 15% conventional down payment or 3.5% fha if you dont have the 15%. Unless you can hold on long term with the extra 500$/month HOA as well, I wouldn't recommend it as a rental. Usually high HOAs like that are in downtown areas.

@Shalini S. I guess I’m going to go against the grain here once again on BP. Seems I am making a habit of this.

So I currently have 3 rentals @$300k+. Each is in a Class A neighborhood. Each one has an HOA that's over $200 and as high as $350. One is a condo, one is a patio home, and the 3rd has a low maintenance backyard. In every case, the HOA takes care of the front yard, the neighborhood, the common use areas, parks, gyms, pools, basketball courts, pickle ball courts, tennis courts, sidewalks, etc. The HOA also makes my neighbors take care of their house so my property value isn't depleted by them. I run zero risk of having a neighbor move in who decides to turn his front yard into a junk yard.

HOA's get a bad rap, but my personal opinion is that mine is a built in maintenance cost which hedges against the downside in overall neighborhood creep. Yes, the fee may go up, but that increase can be written into your lease.

Just my 2 cents.

Don't do it. During recession times, those places lost so much value. No one wanted to purchase one. I Did end up purchasing a condo with $335 HOA. That was back in 2012. Now it's inching up to $400. It's not bad. I bought at a very good price. The place is great for renters especially with all amenities. Don't get fixated by all the extra brand new cool amenities. Of course property management takes care of landscaping, pool and so on but over $500 a month. Seriously think about it. You can find elsewhere that can give almost as good as what you're looking at. my condo has a beach lagoon, boating lake, 21 pools, tennis courts and so on. And it was only advertised for $335 when I bought it.

If this is your first property to purchase, you’re making a mistake. I live in Orange County. Prices are high here. We all want good deal but be smart about the deal you’re getting. Hope this helps