Orlando Home Owner Associations (HOAs), like thousands of HOAs around the country, were created by developers to sell homes and market developments. Since their inception in the 1940s, however, many have come to gain a less-than-stellar reputation. If you’re considering buying a rental home, make sure you understand how HOAs affect your real estate investment.
How Orlando HOAs Work
HOAs operate under their own governing body, typically with elected residents serving on their boards. They claim to create an anchor for their communities and protect property values and resident safety.
HOAs accomplish this by enforcing rules and collecting monthly, quarterly, or annual dues from residents. Some HOAs use dues to cover landscaping or roofing repairs, which can be a nice benefit if the cost of dues makes it worthwhile.
However, HOAs often require owners to conduct exterior repairs, landscaping upgrades, or cosmetic improvements like fresh paint (only using approved colors). Unfortunately, some members of the governing body can let their newfound authority go to their heads. This means they can use their personal opinions to require and enforce unnecessary repairs.
Most HOAs prohibit street parking and even limit the number of cars allowed in a home’s driveway. They can also require trash/recycle cans to be put away (often behind a fence and out of public view) within a specific timeframe.
The HOA can issue violations and citations and even put liens on properties for failing to comply with their demands. All this is done in the name of serving and protecting sans the actual police department (although some do employ security guards).
Ways HOA Restrictions Impact Investors
When tenants take the place of primary residents, HOAs tend not to look favorably on landlords who “upset” the balance in their communities.
You Can’t Rent Your Property
Many Orlando HOA by-laws have restrictions on rental properties. Some may limit the number of rental properties within their communities. Others may require the owner to occupy the property for a specific period of time before renting to tenants. A small subset may not allow any rental properties at all.
HOA Tenant Application Approval Process
When an HOA will allow you to rent to tenants, some may want a say in the “quality of people” living in their neighborhood. This can create hurdles in the leasing process like additional application fees and longer processing times for applicants.
Different Dues for Landlords
HOAs may charge higher fees or have more strictly enforced rules for landlord owners. Those fees can be a killer for investor cash flow, especially when HOAs can increase dues without the owner input. To make matters more confusing, higher-end HOAs may have both a local HOA and a master HOA.
Approval for Repairs and Upgrades
Weirdly, some HOAs require their approval for ANY type of exterior repair or upgrade. You’ll commonly hear of HOAs needing to approve exterior paint colors, septic tank replacements, sod, mulch, rocks, or plants used for landscaping. Some may even require you to use their contractors for work or have yours provide documentation that proves their competence.
HOA Funds Mismanagement
Although not common, occasionally HOA boards face legal issues from mismanagement of their funds. Dues may not make it into deposits, board members pay questionable entities, or checks are made out to an individual (or worse, made out to CASH). Without proper checks and balances in place, problems with money management can lead to attorney fees, lawsuits, and more lost income.
How a Property Manager Can Help
As you can tell, we’re a little hesitant to tell someone to go out and buy a house governed by an HOA as investment property. We’ve found the ROI with an HOA just typically isn’t there.
If you already own rental property overseen by an HOA, you probably know that communication with the board is key. If you self-manage (and have a life), it can be hard to juggle all the communication necessary to keep the HOA happy.
A property management company can help take those headaches off your hands and help you make the most of the situation. We have experience working with HOAs to get rental homes and their tenants approved and any issues that arise by serving as the point of contact. When your property requires (or “requires”) repairs or upgrades, your property manager will work directly with the board to ensure everything is approved and completed as planned.
If you own property in an HOA and want help determining your rental options, reach out today! Call us at 321-947-7653 or request a free rental analysis.
