HOA and leasing not always go hand-in-hand.
It is always wise to check the HOA restrictions before you buy.
However real estate investment can bring you a steady income and someone else to pay your mortgage.
Real estate can be a good form of investment if you know the principles – as any other kind of investment.
If it is a property where you can rent, the moneys coming every month should bring sufficient to pay principal and interest plus cover all your expenses with the property and still leave a surplus to cover any future upgrades.
At the end of the loan you should have the property paid off or if you bought all cash, you should have recouped all your money (in a 30 years scenario) and still have that asset free and clear.
There was a time, not long ago, when people were treating real estate properties like French fries that you have to sell while they are hot. It was hard for me to see how “flipping” - as it is called, when one buys a property and puts it back in the market right back – could be sustainable.
Easy Does It: Steady Growth To Capitalization
I come from the old school where value is added over time: any investment that goes much over 6 to 8% a year must be monitored because it will not be sustainable.
If you look closely on all “bubbles” and economic crashes we have seen through history, will confirm my thinking. If a country grows more than 8% a year, inflation soon follows and eats away any possible gains…
Well, the recent “real estate rush” came to an end as all other “gold rush” did: It was not sustainable.
However, I have seen, read and heard of countless stories of folks that did well by holding their investment properties for a long time while collecting rent.
I know what you may be thinking - I also heard of countless stories of renters that mostly destroyed the dwelling and yes, I was a college student once, but still the odds are in your favor that you most likely will come across good folks that will make excellent tenants.
What other kind of investment will still leave with a roof to put over your head if things go terribly sour?
PS.: As an adult person I have redeemed myself a renter – I never paid a fine for abusing the dwellings I rented and I always received 100% of my “security deposits.”
HOA And Leasing: Real Estate As A Strong Form Of Investment
Given these facts, I continue to see real estate as a strong form of investment, even during challenging times.
And, again if you know what you are doing, maybe that though times are even better to invest, because you can buy low, the pool of renters will be increased as people are reluctant to jump onto ownership, and later on you can sell high.
I work with many investors who want to buy “income properties.”
However the first thing that I do, when working with home buyers investors, is to get the scoop from the homeowners association if there is no “restrictions” about renting – town homes and condominiums need special scrutiny.
After I check with the HOA and leasing situation is clarified, then we may proceed with the other aspects and potential purchasing the place.
Waiting list can be long therefore investment return can be long in coming
This is the kind of info that must be confirmed by not only talking with officials but also by attaining a copy of the by-laws and reading it thoroughly. Nowadays most associations have their by-laws and almost any other info posted on the web. If not not they have a PDF that they can email to you upon your request.
Any ways you should got to know what is the “official” position of the HOA and leasing.
Say you are now single, so a 1 bedroom / 1 bath condo would be just fine as your first place. Three or four years down the road you get married – your little condo becomes small as a dwelling for two [let alone to any kids], however it is a huge investment opportunity.
If you have bought in a place were you can rent, you can have the place paid by your renters.
So is never a good idea to lock yourself by owning a place where you cannot rent.
HOA and leasing is on the major source of contention between homeowner and associations.
Often times only a percentage of the units can be rented and the existing owners may already taken those slots.
The ones that now want to rent, have to go into a “waiting list” which can be a long wait.
As I wrote above and I say often to my clients – get to know the rules, ask questions, ask for the by-laws and read it all then “digest” it all before you buy.
HOA and leasing is among the many HOA enforcements. In some places it is one the top priorities due to the fact that many communities prefer to maintain the renters ration low. As rule of thumb, more owner occupied development means higher property value. To read more about HOA Enforcement, please click here
An HOA can make your staying in their community an enjoyable experience …or it can make you to repent of ever having a thought of purchasing that home.
So the more you educate yourself about your future home owners association the better you can hedge yourself against future headaches – here are additional “pages of knowledge” that might prove valuable down the road:
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JC Fagundes, Associate Broker
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