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What Investors Need to Know About Home Owners Associations and HOA Management Teams


When it comes to making choices about residential property investments, it is wise to have knowledge of any Home Owner Association (HOA) and HOA management teams before you decide to invest in a particular subdivision. You should have all the related facts at your disposal before you make your final purchase decision–because even when you are only buying property for investment purposes, you can wind up dealing with HOA-related headaches. Yes, this takes some research effort, but you don’t want to find yourself without redress to issues that can arise.

HOA CONSIDERATIONS REFERENCE

  1. Ask for a copy of the CC&Rs and review them before you decide to purchase a property; make it a stipulation for making a purchase.
    1. Are the CC&Rs clear, logical, and manageable? Are there any obtuse or unreasonable rules and regulations? Is there too much room for interpretation? Do the CC&Rs allow or circumvent self-appointed vigilance committees?
  2. Learn about the HOA board.
    1. Are they accessible or a stealth organization?
    2. Interview the board. Find out if their collective HOA philosophy meshes with yours.
      1. Does the board represent the owners and act in their collective best interest (including financial) or does the board demonstrate it operates on behalf of a select core group?
      2. Does the board have a track record of penalizing rental properties more often than other home owners?
      3. Are owners included in the decision making with HOA fee increases?
    3. Find out how often board meetings are held, when, how the board alerts owners to the meetings, if/when meeting minutes are distributed and with what regularity. Regarding the latter, have the board provide proof of said distribution.
    4. Ask for the names and contact information of a few owners outside of the board and interview them about the board.
  3. Ask if there is a HOA management firm in place and if so, get the company contact information and key point-of-contact name.
    1. Conduct interviews and determine if the firm provides quantifiable ROI for their fees.
      1. Do they recognize owners as their customers and appreciate who pays their fees, or do they answer only to the board?
      2. Do they/are they able to field more complex concerns like inter-owner issues like property damage and fencing conflicts, or do they simply issue written warnings and fee violation notices about lawn or lighting infractions?
      3. Do they field landscape maintenance requests in a timely manner or require additional contact?
      4. If you only receive contact information for a management team and not an HOA board, make sure there actually is an HOA board to which the management ream reports.
    2. Find out generally how often HOA fee increases occur and ask for proof that the increases are approved by/substantiated by the HOA board.

WHY YOU NEED TO KNOW

You could wind up paying higher and higher HOA fees with no recourse, no substantiation of the increases. If you are an out-of-state investor you could have little to no leverage to have your concerns addressed, little if any visibility to the legitimacy of violation claims. If an HOA is not rental property-friendly or has a track record of penalizing rental properties more often than others, you stand to alienate and lose good renters, which in turn adversely impacts your revenue stream.

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