As a San Antonio rental property investor, the chances are that the matter of buying a property with a Homeowners Association (HOA) will come up sooner or later. This is particularly evident if you invest in single-family properties built in the last 20 years, where Owners Associations are very common. The most important thing to consider about buying a property with an HOA is that it includes benefits and drawbacks.
The enhanced oversight and restrictions of owning a property with an Owners Association can be both an advantage and, sometimes, create a headache or two. Therefore, before you invest in a rental with an Association, review these pros and cons. At that time, you may pick the best option for you.
At first, you should comprehend what an HOA is and what they do. HOAs get a lot of criticism and bad press, not all of which is true. This is because HOAs exist primarily to help maintain certain standards within the community. The governing boards of some Associations are comprised of community residents, while others are overseen by the community’s developers; some have professional management, while others do not.
All Owners Associations have governing documents called covenants, conditions, and restrictions (CC&Rs), which explain the rules and requirements for property owners in the community. After you purchase a property with an HOA, you instantly become a member, and you are liable to pay any related Association assessments. These assessments are required to maintain common areas and any other amenities the community may offer, such as parks, recreation centers, and so forth.
No two Associations are similar; therefore, it is vital to do your research and examine the specific HOA documents for any property you want to buy.
Because HOAs can vary greatly, it is feasible to purchase a single-family property with an HOA that comes with a variety of incentives.
For instance, some HOA communities offer beautiful, private amenities such as swimming pools, parks, playgrounds, tennis courts, or a recreation center or gym. Awarding a renter access to these amenities (if allowed by the governing documents) can be a big selling point for a rental house, something that may make finding and keeping tenants easier.
Another huge advantage of some HOAs is that they may offer common areas and sometimes even front yard maintenance. They may also suggest trash removal services or snow removal, depending on the community. Allowing the HOA to conduct even a few maintenance tasks may lessen the obligation of a San Antonio property manager.
Several individuals want to stay in communities with HOAs because they seem cleaner and maintained better. This is not only advantageous for property values, but it can also be a huge appeal for prospective tenants.
Having a rental property in an HOA, obviously, includes a couple of disadvantages as well. Generally, homeowners who are unhappy about their Association feel that way because they’ve either decided they don’t like (or don’t want to obey) the community rules or don’t like paying their assessments. However, the main concern for property investors is that sometimes HOAs will place restrictions on your ability to lease the property you own.
For example, numerous Associations are now prohibiting owners from using their investment properties as vacation or short-term rentals. Some HOAs even restrict or prohibit long-term rentals in the community. There may also be rules about how long the property owner must occupy the house before renting it to others.
An HOA can also give headaches for rental property owners by requesting special assessments for unplanned costs or requiring property owners to conduct additional tenant screening. These are just a number of incidences, but because every HOA is different, you may encounter all sorts of restrictions, large and small. Association assessments will take a chunk from your cash flows, and it’s not always possible to raise the rent enough to cover the amounts fully.
For example, you decide to acquire a property with an HOA. It follows that you’ll also need to budget extra funds for special assessment costs, which don’t come up too often but can be large amounts, especially if the community is older and in need of repair or replacing big-ticket items.
Finally, determining whether to acquire a single-family rental in an Owner Association depends on whether the pros outweigh the cons. It also varies on the kind of community and HOA and how likely the governing board is to meddle in the leasing process. So, it is imperative to communicate with other property owners in the area, read the documents correctly, and realize exactly what you are getting yourself into. This is solid advice for any purchase, but particularly when buying a property with an Owners Association.
Do you need a local expert’s advice on a property or community? We can help! Contact Real Property Management Campanas to learn how we help rental property investors like you find profitable investments.
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