One of the things you might encounter when buying your properties for rent is the Homeowners Association or HOA. A Homeowners Association is an organization that manages planned residential developments such as townhouses and condominiums. It comprises of a board of directors who were elected by the homeowners. They supervise the common areas of the property and are responsible for maintaining the amenities.
The HOA also makes and enforces the rules in the property. If you plan on purchasing a townhouse or condominium, you would have to work with the HOA. Before you do that, you have to understand their full purpose and if you agree with their terms.
There are advantages to working with an HOA because they offer services that can help lessen your responsibilities as a landlord. Here are the things that the HOA is responsible for:
- They take care of the maintenance of common areas and surrounding areas.
- They are responsible for making sure the amenities are clean and readily available for everyone.
- They make sure that your property will not lessen its value because it can regulate architectural standards.
- They can act as the mediator for conflicts between your tenant and their neighbors.
- They will implement rules and make sure that all homeowners will follow.
It sounds tempting, right? But remember that these services do not come for free. The homeowners pay a certain amount for fees for the HOA to use for maintenance and repairs?
HOA Fees:
Did the mention of fees scare you away? Do not reject the idea just yet. HOA fees are reasonable because these will pay for the expenses needed to maintain the common areas. The fee may vary depending on the type of property and the coverage. For condominiums, there are more amenities (swimming pools, gyms, lobbies, elevators, etc.) compared to single-family homes.
The fees can range from $150-$700 with an average of $200 depending on the amenities. The more areas that need upkeep, the higher the amount for fees.
Reserve Funds:
The HOA fees will be divided into two parts. The first will be utilized for the overall upkeep and maintenance of the property, and the second part will be reserved for future funding for renovations. Homeowners can be very particular on where the reserve funds will go. These funds can be used for landscaping projects, building renovations, and anything that will improve the property.
Here are some questions that you should ask before coming up with a decision:
What is the coverage of HOA fees?
You should ask the inclusions of paying such fees because you should be aware of where your money goes. Your tenant should also be informed about this.
What happens if you don’t pay the HOA fees?
Check their policies on late or missed payments. Some HOAs will charge for late fees, and if you continue to avoid paying, it might result in your property’s foreclosure.
What are the rules and the penalties for not following them?
There are rules that homeowners are supposed to follow. For example, they can standardize the overall look of your property. They can choose the type of fence you should have or the landscape of your yard.
The penalties will depend on the HOA. Make sure that you ask them for you to know what you must avoid. Inform your tenants of these things because they might unintentionally break the rules.
Can you charge your tenants for HOA fees?
One of the things you should decide on is who will pay for the HOA fees. Some landlords will ask the tenants to pay the amount themselves while some will opt to split the cost. You can also include the HOA fees in their monthly rent but make sure that they are aware of this by stating it on the lease agreement.
There are disadvantages to buying a property with a Homeowners Association. The main setback is paying the fee because this is an additional expense for you and your tenants. They also have their own set of rules that you are required to follow and incorporate in your lease contract.
I can only give you the information you need, but the final decision will be all on you. If you think you can work with an HOA, go ahead and make that purchase. Don’t forget to market your unit through Padleads. You can create your property listings there, and to increase chances of filling in a vacancy, you can also syndicate those listings to other web pages.