Buying houses to rent is a big decision for investors, especially if you’re new to rental property investing. There’s a lot to consider, like where you’re going to buy property, how you’ll finance the property, and how you’ll run your rental business. One aspect to consider is buying properties in HOA communities–which is becoming more difficult for investors. If you want to learn more about homeowner’s associations and how they’re trying to stop investors from buying houses to rent, just keep reading.
Contents of This Article:
- What Is a Home Owner’s Association?
- Investors Are Having a Hard Time Buying Houses to Rent in HOAs
- Why Are HOAs Fighting Back Against Institutional Investors?
- What Steps Are HOAs Taking to Block Investors?
- Tips for Investors Navigating HOAs
- What Rules and Regulations Do HOAs Generally Have?
- Professionally Manage Your Investment Properties
What Is a Home Owner’s Association?
A homeowner’s association or HOA is a private organization that makes and enforces rules in certain communities or subdivisions. In other words, HOAs establish rules and regulations for community members to follow and abide by. That said, you’ll commonly find HOAs in common-interest residential communities.
Investors can purchase rentals in HOA communities. However, they have to follow a set of rules and regulations and pay fees to cover operations and common-area maintenance. For instance, if you own a home within an HOA, you may need permission to build a garage, change the landscaping, or paint your property.
Before buying a property within an HOA, do your research and review their requirements. Recently, many HOAs have been fighting back against investors buying houses to rent. Keep reading to learn why HOAs are pushing back against institutional investors.
Investors Are Having a Hard Time Buying Houses to Rent in HOAs
Currently, buying houses to rent in HOAs is becoming more and more difficult for investors. In fact, many HOAs are blocking investors from buying properties in their communities.
In 2021, investors flooded the market, making it difficult for people to purchase owner-occupied homes. Last year, investors bought nearly 1 in 7 homes sold in the nation’s top metropolitan areas, according to Redfin. Investors’ share of home purchases reached the highest level in two decades, mainly targeting newly built homes.
Ultimately, this influx of rentals in HOA communities made it difficult for homebuyers to secure properties. On the other hand, it also increased the number of rental homes within some HOAs.
As such, to keep renters out of certain areas in the US, some HOAs are taking action to block institutional investors. Although it’s hard to determine how many associations are passing rules to restrict investors, the number seems to keep increasing. Read along as we discuss why this is happening.
Why Are HOAs Fighting Back Against Institutional Investors?
HOAs are fighting back against investors for a few reasons. For instance, out-of-town landlords tend to be less responsive to issues within the rental property and may lack maintenance and management. As a result, the quality of life for residents could suffer.
Aside from affecting the quality of life for community members, single-family home investors have been known for adding to the lack of available and affordable housing for sale in the US. So, another reason for blocking investors is to keep inventory open for locals to find affordable homes.
Here are some of the steps HOAs are taking to stop investors from purchasing homes in their communities.
What Steps Are HOAs Taking to Block Investors?
Many HOAs are making amendments in certain states to place restrictions on landlords and renters. For instance, to stop investors from buying homes to rent in HOA communities, many associations are attempting to cap the number of homes that can be rented in a neighborhood. Furthermore, HOAs may require rental tenants to be approved by their association’s board before they can proceed.
So, instead of investors simply buying rental properties in HOA communities, they’ll have to be approved in some states. In other areas, like Walkertown, NC, some HOAs may require that new buyers live in the home or leave it vacant for six months before renting it out. The goal of this is to discourage rental investors from buying properties there.
Overall, regardless of their actions, the goal is the same. HOAs are trying to block institutional investors from purchasing single-family homes in their communities. So, let’s go over how investors can navigate these restrictions and buy properties in HOA neighborhoods.
Tips for Investors Navigating HOAs
Investing in an HOA community has a few benefits for investors. For one, properties in well-maintained communities are highly profitable and can be easier for investors to manage. For instance, some HOAs may handle homeowners’ repairs and services and mediate property-related disputes between neighbors.
That said, to thrive in an HOA community, investors need to know how to navigate the process. However, with a recent trend of trying to block investors, it will start getting a little trickier. So, how can investors navigate HOAs?
Ultimately, the best thing you can do as an investor is research. If you’re looking in an HOA community for a rental home, thoroughly review their restrictions and rules before proceeding with the property purchase.
If an HOA doesn’t allow you to rent your property, don’t invest there. Unfortunately, if you buy a rental home in a community with tight restrictions, you could be forced to sell the property. If you go this route, it could hurt your rental business.
On the other hand, if restrictions are placed once you already have a tenant, it can get even messier. You could have to work out a deal with your tenants for them to move out.
However, the protocols are a little different if you’ve had a rental property with steady tenants for a year or two and then rental restrictions are placed. Sometimes, your property and tenants are grandfathered in, depending on the property, lease, and HOA rules.
What Rules and Regulations Do HOAs Generally Have?
Before purchasing in an HOA community, you’ll want to research their rules and restrictions. For example, most newer subdivisions have some basic building requirements, such as:
- Home Size
- Building Type
- Landscaping Requirements
- Proximity to Other Buildings
- Restrictions of Visible Trash
- Home Occupancy Limits
- Fencing Rules or Requirements
- Noise Complaint Policies
- Maintenance Requirements
- Size of Lots
- Restrictions on Parking Large Vehicles
Some HOAs have stricter rules, such as:
- Home Paint Color
- Type and Number of Pets Allowed
- Color and Type of Roof Shingles
- Trees and Landscaping Restrictions
- Short-term Rental Restrictions
It’s crucial for investors to thoroughly review the rules and restrictions of each HOA before they invest in an area. If you need help navigating the process and want to ensure all the requirements are met, reach out to your local Washington, DC property managers.
Professionally Manage Your Investment Properties
Buying houses to rent means you’ll need to market your rentals, find tenants, maintain your properties, and ensure compliance throughout the process. Doing all of this on your own can be challenging, especially if you own several rental properties. However, you don’t have to do it alone.
Bay Property Management Group offers comprehensive management services to ensure your rental business runs smoothly–even when you’re not there. Whether you need help with tenant screening, maintenance and repairs, rent collection, and more, we’ve got you covered.
We offer full-service rental management in Baltimore, Philadelphia, Northern Virginia, and Washington, DC. Contact BMG today if you need help managing your rental properties.