Are you looking to purchase a rental property with a Homeowners Association? Beware of the HOA community fees and Homeowner Associations CC&R. Association dues can eat up a lot of your potential rental income, especially here in Orlando, Florida. Our market and the State of Florida are filled with highly desirable single-family homes in subdivisions with gated communities. But you have to think about, How they are paying for that extra gate security? Or the stunning landscaping and maintenance throughout the community? The way you get these beautiful communities is from payments made to your Homeowners Association. But what comes with these fees are Rules and Regulations. To be successful, we have to fully understand the Homeowner Associations and the rental property at hand. We need to know the following. Necessary information like, What are HOA's? Why do Homeowners Associations exist? What are the average HOA fees in Orlando, Florida? Should I buy a rental property in a Homeowners Association? This article is everything you need to know about rental properties in HOA communities.
What Is An HOA or Homeowners Association?
Well, an HOA stands for Homeowners Association. Investopedia defines a Homeowners Association as "an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and its residents. Those who purchase property within an HOA's jurisdiction automatically become members and are required to pay dues, known as HOA fees or Association Dues. Some associations can be very restrictive about what members can do with their property." Living in an HOA community, you can expect well-maintained common areas, access to amenities, preserved property values, architectural control, to name a few, but if you live in a Homeowners Association, don't be a real huge HOA-er. You know you're an HOA'er if this video depicted here relates to you.
But in all seriousness. An HOA has a lot of pull in how your rental property will perform, how it will operate, or if it's even possible at all. Get a solid understanding of how your HOA operates.
The Benefits of a Rental Property in a Homeowner's Association (HOA) are:
- Homeowner Association's Preserve & Stabilize Property Values
- Subdivision Safety & Security
- Connects Neighbors and Promotes Community Bonding
- Control of architectural landscape
- Access to Amenities
- Maintenance & Upkeep
- Additional Services and Oversite
The Negatives of a Rental Property in a Homeowner's Association are:
- HOA's can be very expensive & reduce your monthly rental income
- Can have Strict Rules & Regulations
- Meetings and Board of Directors
- They can have restrictions or limit rental properties in a subdivision
- Added Fines If Rules Are Not Followed
- Ability to put a lien on your property
- Never Ending Citations
- Increases in Association Fees
Suppose you are considering purchasing a rental property in an HOA community. It would be best if you got your hands on the Rules and Regulations. If the subdivision does not allow rentals, you obviously don't want to buy in that community. Check for allowed lease lengths, how many lease terms you have in a calendar year. Do they require your tenant to be screened by the HOA?
What Are Some Common Homeowner Association Rules and Regulations?
Homeowners Association Rules and Regulations will typically be outlined in the Declaration of Covenants, Conditions, and Restrictions or CC&R. They are enforced by the HOA board, which typically consists of homeowners in the community. Most HOA's will have a Community Association Management company handle the community's day-to-day operations. Some of the common local Community Association Management Companies in Orlando and Central Florida out there are:
- Leland Management
- G & P Management
- Artemis Lifestyles
You will also see the national Community Association Management player in the Central Florida Market like:
- FirstService Residential
- Sentry Management
- The Management Trust
Common Rules & Regulations.
- Exterior Maintenance Responsibilities
- Exterior Storage
- Architectural & Design Changes
All of these restrictions need to be considered when purchasing a rental property located in a Homeowners Association. If you get a chance, drive the neighborhood. How does the community look? Does the subdivision look well maintained? Are there excessive cars parked in the street? These are some telling signs of how strict and how well managed the Homeowners Association is.
How Much Are Homeowner's Association Fees?
The average Homeowner Association Fees for a Single-Family Rental will typically fall between $200 to $300 per month. The fee structure is generally paid monthly, quarterly, or yearly. These fees are charged to the homeowner to cover the community maintenance expenses and repairs; all community members must pay. The subdivision size, amenities, upkeep required, and even lawsuits can increase or decrease these Homeowner Association Fees. When purchasing an investment property in an HOA, consider the value you get with being in an HOA. Are the amenities worth it? Do you feel tenants will value those amenities? Are you looking for strictly a cash-flowing property? Or are you hoping to achieve a substantial appreciation of the property over the coming years? These are the questions that need to be answered before purchasing an investment property in an HOA. We have some communities here in the Orlando, Florida market with monthly HOA fees over $500/mth. Don't get me wrong; the amenities are phenomenal! You have water parks, social events, pristine landscaping, minimal property maintenance required because everything is taken care of for you. But if the rental rates can't cover the costs, it best to move on to another investment.
Should I Buy a Rental Property in a Homeowners Association?
When considering buying a rental property, you have to run the numbers. If the numbers make sense, and you're coming out ahead. Then you have a good investment in your hands. Buying a rental property in a Homeowners Association is no different; calculate the association fees into your analysis, and voilà. Single-family rentals in well run HOA communities are desirable for tenants and attract high-quality prospects. People want to enjoy the community pool, workout facility, tennis courts, and common areas if the HOA handles lawn service even better! The more you can offer the potential tenants, the better off you'll be. But due diligence is essential, and there are good and made community associations. So, ask the neighbors if you get the opportunity and happy investment hunting. If you found this useful or would like to learn more, please, don't hesitate to reach out to Orlando's Best Property Management service provider. The Listing Real Estate Management is your full-service residential property management service provider servicing all of Orlando and Central Florida. Are you looking to purchase a rental property here in Orlando? Reach out to us here to get the inside scoop.