HOA vs No HOA

14 Replies

I am looking at a buy and hold strategy with the idea of increasing properties over time. I have been approached by a trusted friend of a friend who is offering new construction at an early bird bulk buy discounted price. This property has a HOA which I have never considered as a good investment due to less of my payment going to equity (instead going to the HOA) and not having total control of the unit. My potential partner argues that it will increases property value and in a long term investment you do not have to worry about the complex getting run down.

Thoughts?

@Kevin Kite the answer is - there are good HOAs and bad HOAs. I am a professional HOA manager. If this one has good rules regarding the upkeep of homes and the quality of homes (like all of a similar size, similar materials, etc.) AND they enforce those rules then that neighborhood will probably maintain its value better. Likewise enforced rules that prevent people from painting their house purple and storing junk cars on the front lawn. Therefore your dollars spent are probably worth it. However, if they don't enforce the rules (or don't have them) or the opposite - are arbitrary Nazis about a tiny infraction or pick on certain residents while ignoring others - then maybe that neighborhood is to be avoided. The best thing to do if possible is to be active - volunteer for the board or a committee. Learn the rules. An HOA is only as strong or good as the people who run it.

@Kevin Kite

Teri gave you some great advice. I would add, your only assurance will come from joining the board once an association has formed. Otherwise, your investment will be in the hands of anyone that purchases in the community. There are no skills or qualifications required, just ownership. Good Luck. 

thank you Teri and Nicole!  I will consider that on my future purchases.

@Kevin Kite I'd like to offer some insight from my personal experience. I was elected president of my HOA. I wasn't elected because I was experienced or motivated for the position, I was elected because I was 1 of the only 3 owners that showed up to the initial meeting. Our property was only 13 units. Teri outlined some very good points, from a property management position. For me, from a homeowner position, owning a property with HOA in the equation is like living in a rental property you're financially responsible. our community wasn't big so, the management didn't take our account seriously. Being HOA president, I found myself either fighting the management agency to do their job or fending off other HOA owner's tenants. I desperately wanted off the board. Finally, a new owner came along and was comfortable about taking over as president, I turned over to him and we picked up a new management agency. Just when I thought I could finally enjoy my living, I now found myself battling the HOA board and the new management agency with the on going change of rules and bylaws, etc. You'll have people who don't like the rules and when they get the chance for election, they will change the rules to suite them. it's an ongoing battle, one year, you can do this, the next year, you can not.

I don't mean to discourage you. There are some benefits to an HOA where you share cost on security, maintenance and other community amenities and services. Experience may vary. I think the 2 factors that was a major issue for us was we were a small community, it wouldn't be profitable for a management agency to contract us. And a lot of our HOA owners lived out of town and rented out their units so, they were not being pro active on HOA meetings and addressing issues. Something to think about. I hope it gave you insight. Good luck!

The bad thing about HOA's: They control the use and appearance of my home. I can't put a fence around my front yard if I wanted to.

The good thing about HOA's: They control the use and appearance of my neighbor's home. If my neighbor wanted to open a mechanic shop in his garage and repair cars in his driveway, that's a no-go. Same thing if he wants to paint his house purple.

@Kevin Kite, I would not buy and hold HOA property. Teri S. is spot on in her assessment. Tuan Ha I can empathize with your assessment as well. Kevin I'm not sure if you've ever listened to Jason Hartman, but he classifies HOA's as

1. HOA "Light" (new construction/low dues)

2. HOA "Medium" (Existing construction and average dues)

3. HOA "Heavy" (High dues/large assessments)

If you can buy HOA light (new construction), and the numbers work, then hold on to the property for two years and sell for appreciation. I would avoid existing HOA construction like the plague. In your area HOA litigation is very common and ends up costing every owner in the end.

Personally, I will never buy in an HOA ever again, but that's just 27 years of HOA living and eight years as HOA president talking. What do I know?

I prefer 'HOA Light' as it should help keep the neighborhood nice and protect your investment. I also like No HOA if the neighborhood is right. :-)

@Jason Hartman, I love listening to your podcast. It was a treat to hear your guest appearance on the Mark Poldolsky (thelandgeek) show. I was suprised you left AZ. You might want to update your profile to San Diego, CA. Your humble beginnings from Los Angeles, to Newport Beach, to AZ, and San Diego have been inspirational to me. I'm about to embark on the same path you took in hopes of enjoying similar results. Thanks Jason Hartman!

Thanks @Michael M. - I'm back in Scottsdale after a short seven month stint in La Jolla just to pick up that tax deduction. 

@Jason Hartman, good to hear. Your not very far from Mark Poldolsky, perhaps there's another show in the works? The East Valley has been building like crazy. I'm curious how that will shake out if the market turns. At least the HOA property there tends to be detached and cost less than California. I almost moved there last year. If I end up back in AZ I would most certainly get solar panels to offset the high electricity costs. My brother and his friend did a side by side comparison of energy efficient AC system costing $12k vs solar panel costing $24k and the solar panels resulted in a $200 per month savings on his electricity bill. Since your back in AZ, your also not far from Robert Kiyosaki. Perhaps you can guest star on his show as well? Thanks for sharing your many years of wisdom across all your podcasts.

HOA rules can be arbitrary . But can be worked around . in a community next to me , they allowed boats on trailers next to the house , but not camping trailers . One resident had a camper and he got "the letter" . So this guy also registered the camping trailer as a homemade boat . Hoa said that it doesnt float , the guy basically said the rules doent say the boat has to float . He won , they changed the rules

Hi @Michael M. - That's good to hear about solar, maybe it's finally at a point where it can work without government subsidies. We shall see. 

I just put HOA into my search and this is the first one I clicked on. I had an idea of what I wanted to reply with but then I quickly realized this original post is from 3 years ago haha. so I am curious what you ended up doing!?

@Kevin Kite  

@Tuan Ha . Tuan, thank you for your insight to hoa’s. I’m looking at condos in my area. It is a large complex at least 100 units. I live close so attending board meetings will be beneficial.

Best,

Adam

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