HOA trying to implement a Rental Cap!

10 Replies

My wife and I have our primary residence and a rental property in the same neighborhood. Our HOA Board is trying to implement a 20% Rental Cap. However, they will need 67% of the lots to be in favor for it to pass.

The board is stating that low number rentals are more advantageous for prospective purchases from the bank and Mortgage Company's point of view. Furthermore, mortgage lenders frequently ask the property management company for our association for information regarding the number of rental units in the community as it may possibly impact their willingness to extend financing to someone purchasing a home.

This seems inaccurate and contrary to what I have heard from local lenders. Feedback is much appreciated! 

@Travis Jones

It is quite common for HOA's to have a cap on the number of rentals and other similar (annoying) restrictions. I am not sure how it is enforced though. You would think that since you ALREADY have a rental in the neighborhood, they won't force you to convert/sell.

But who knows. I've heard some scary HOA stories!

As far as their reasoning, it is basically the theory that homeowners will take better care of their properties, thus keeping values stable/rising.

Is this a condo or a house? HOAs are PIAs. I would try to garner support by making people aware this is a limit to what they can do with thier property. People dont always think about how they might not want to sell thier property in certain situations. Market is down, family member is sick,transfers etc. It limits thier options, is thier an issue, if not it is a rule that doesnt address a problem.

FHA backed mortgages do have rental number restrictions for properties within HOAs. Currently that number is 51% rentals and can go as high as 65% rentals if the HOA otherwise meets other criteria.

When discussing this with your neighbors, make sure they understand that, in a down economy, rental units generally have fewer foreclosures and statistically they are the ones that continue to pay dues when others are defaulting.  Essentially, the successful rental units keep a community afloat.  

If there is a vacant position on the board, you should consider running for it so that the investors in your community have a voice and representation if they do not already have that.  You may need to actively campaign against this change in your community with letters, phone calls and door knocking (all at your own expense, of course) to ensure that property rights remain free.

Good luck!

My current rental property will be fine since we're still below the 20% cap that they're trying to pass. I had an issue with their justification of passing the amendment. Thanks, Kyle.  

Thank you, Linda! 

Your podcast came at an appropriate time for me. I was against running for an open position until last week. Now I'm starting to think it may  be worth the time and effort, maybe!

you will need to inform other owners that this limits their usage, limits their potential buyer pool if they ever want to sell, and can lower their property value.

also, get firm numbers about the % of rentals that worry a bank. I believe its not an issue until its over 51% rentals. if you can prove to homeowners that there is no reason to fear becoming non warrantable, they may vote in your favor.

my suggestion is get together with other landlords in your community and work together.

I know that I am 2 years late to this conversation but wanted to give you my perspective on the "Rental Cap" Conversation.

I have bought in both scenarios with a rental cap and without. I bought a unit in Seattle, Washington back in 2005 (Still own it today) Building is only 24 Townhomes in a gated community with parking and when I bought into it, the Realtor at that time told me that I could Rent to anyone, as well as have any kind of Pets. I thought this is cool, as you are so restricted in an Apartment. What I learned after being there for 3+ years is that it was just like living in an Apartment as no-one knew each other and there were always people coming and going, lots of Parties and such and with the animals, a lot of the renters did not care if their animal urinated outside on the sidewalk, as they stated the dog had to pee. I decided I had enough and after a Remodel I went to sell the unit, but that is when the recession was starting and would have lost all the money I invested in the remodel. I was also told by a New Realtor ( Same one I have today in Seattle ) that I could only sell for Cash or conventional financing. (No VA OR FHA) which she explained everything in detail to me. Long story short, is after her suggestion I joined the Board and was able to discuss and hear other homeowners that cared what their thoughts were. I was voted within 4 months to the President of the board and with the help of the rest of the committee and My Realtor, We changed the rules to put a cap in place only allowing 25% of the units at any given time to be Rented Out. The Pet policy was changed to 2 animals and with dogs, they needed to be under 50 pounds each. We are able to accept all forms of Financing, so no longer limited, and the best thing is It keeps the Property Prices up! Best to you all now, Joshua Robert Portland, Oregon

Originally posted by @Josh Stevenson :

I know that I am 2 years late to this conversation but wanted to give you my perspective on the "Rental Cap" Conversation.

I have bought in both scenarios with a rental cap and without. I bought a unit in Seattle, Washington back in 2005 (Still own it today) Building is only 24 Townhomes in a gated community with parking and when I bought into it, the Realtor at that time told me that I could Rent to anyone, as well as have any kind of Pets. I thought this is cool, as you are so restricted in an Apartment. What I learned after being there for 3+ years is that it was just like living in an Apartment as no-one knew each other and there were always people coming and going, lots of Parties and such and with the animals, a lot of the renters did not care if their animal urinated outside on the sidewalk, as they stated the dog had to pee. I decided I had enough and after a Remodel I went to sell the unit, but that is when the recession was starting and would have lost all the money I invested in the remodel. I was also told by a New Realtor ( Same one I have today in Seattle ) that I could only sell for Cash or conventional financing. (No VA OR FHA) which she explained everything in detail to me. Long story short, is after her suggestion I joined the Board and was able to discuss and hear other homeowners that cared what their thoughts were. I was voted within 4 months to the President of the board and with the help of the rest of the committee and My Realtor, We changed the rules to put a cap in place only allowing 25% of the units at any given time to be Rented Out. The Pet policy was changed to 2 animals and with dogs, they needed to be under 50 pounds each. We are able to accept all forms of Financing, so no longer limited, and the best thing is It keeps the Property Prices up! Best to you all now, Joshua Robert Portland, Oregon

 In some areas, there are investors (cash or conventional) willing to pay more than what an owner occupied buyer would pay for a condo.

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