Would you purchase an investment property with an HOA?

Question

I am currently searching for my first investment property. I plan to live in this house for a year and then rent it out long term after that. I found a property where the numbers work, but it turns out that it has an HOA. It appears in the covenant that they do allow leases as long as they are 6 months or longer. Is this a property that you would even consider due to the HOA? / If you have a rental property with an HOA, what has your experience been like. I want to know what to expect!

Thank you!

Kyle Kipka · Answer

To date all my rentals are located in HOAs. I don't like that it is a variable factor I don't have control of and things like the HOA fees can increase with little recourse or warning but so far I haven't had too many issues overall. What I do like is that I don't have to worry about how the yard is being kept up, the other perks like snow removal for the tenants and how some of the bills are essentially automated as part of the HOA fee and one less thing I have to worry about such as the trash and water in a few of them. When I reviewed the numbers it seems like typically when factoring in those expenses and saving on the insurance policy (since I'd only need a separate "walls-in" policy) it wasn't actually cutting into the cash flow as much as it might look on the surface. YMMV

Bob Stevens · Answer

Of course as long as it makes sense, ITS ALL about the numbers

Matthew Wolk · Answer

If the numbers make sense then potentially do it!  The issue with HOA's is if one day they say no more renting out units in the building you would be in a very very tough spot.  This is rare but could happen.

Jacob St. Martin · Answer

If everything else about the deal was an absolute homerun then yes, but most of the time no. HOAs are a variable that you can't control or plan for. The HOA may be friendly toward investors now but all it takes is a change in leadership to make it suddenly illegal to rent in that neighborhood. Additionally, they can raise their rates which eats into your cash flow. I would especially not do this if doing STRs or renting in college towns because HOAs tend to be more strict about prohibiting those types of investments. Lastly, this is not always true but some types of properties with HOAs like condos or townhomes typically appreciate more slowly than other properties

Carson McGee · Answer

I have never had any issues with HOAs regarding long-term rentals. They obviously aren't an investor's preference due to the cost and risk of regulations. It definitely depends on the deal and circumstances. I own short-term rentals in both Maui & Orlando and both have HOAs. Those specific communities are built around transient accommodations but still add an increased monthly expense. You also need to account for potential services they provide that you wouldn't have to pay out of pocket for (trash service, community pool, snow removal etc.).

Tiamo Wright · Answer

It depends. My preference is no HOA so that I have control over the property and the variables don't change that are out of my control. For example one property I have just banned STR and anything under 6 months, that was a big hit for people that were doing AirBNB and unexpected to the model. On the other hand HOA has the pool and the trash service and other benefits so it just depends on what you are going after to see if the pros outweigh the cons.

Albert Hasson · Answer

Terrible advice to avoid HOA’s!  I will only invest in houses that are in HOA’s. HOA’s force tenants and owners to clean up after themselves, put the trash cans back behind the gate, don’t allow street parking or parking on dirt/gravel.  They offer amenities like parks, playgrounds, grassy open spaces and even pools/rec centers. In my experience HOA’s are loathe to raise dues.  HOA boards are made up of homeowners who typically like to run a tight ship and don’t want to pay more than they absolutely have to.  It would drive me nuts drive by a rental house with trash outside, cars parked on the dirt, weeds in the yard and peeling paint.  Believe me you will sleep much better with an investment in an HOA.

Eliott Elias · Answer

Depends on how much the HOA is and what restrictions it has. I avoid it.

Eric Bilderback · Answer

Many times I think it is preferable.  Have some standards in the neighborhood.  But I don't necessarily want to live in a HOA, because I don't want some dipsticks standards being enforced on me.

Steve Vaughan · Answer

This.  It's probably not as much of a factor in Jackson, but yard keep and snow removal are huge pains for me, especially with 3+ unit properties.    Duplexes and houses do their own (yeah right) but I still have to winterize and maintain sprinkler systems. She also won't have to 'worry about' gutters and downspouts,  roof, exterior paint, railings, steps, etc. There may also be higher depreciation since there isn't land to subtract from cost basis.

My 'dream rental' from a pita standpoint is a condo in Vegas. No snow or grass, humidity, storms, earthquakes, flooding or state income tax.

Would you purchase an investment property with an HOA?

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