Real estate investors are regularly exploring neighborhoods of all kinds. As they seek out the next great investment opportunity, they are likely to encounter homes in neighborhoods with homeowners associations (or “HOAs,” for short). But here’s the question: Should you invest in homes with HOAs?
As with so many questions in real estate investing, the answer is: It depends.
HOAs come with their own set of pros and cons. At HUNTAHOME, we are the leading provider of property management in Dallas and Fort Worth. Here’s a look at the advantages and disadvantages of HOAs through the lens of our experience in the area.
What Exactly is an HOA?
First and foremost, what exactly is an HOA? It’s an association of owners in a given area who create and enforce rules that must be followed by all owners in that same area. HOAs are not optional. If you buy in an area governed by an HOA, you immediately become a member. Members pay dues and are required to follow the rules.
We more often see HOAs in newer, preplanned subdivisions and communities. You’ll also find HOAs when investing in condominiums and townhomes.
The Advantages of HOAs
There’s plenty to like about investing in homes with HOAs. In general, the presence of an HOA means that the neighborhood will look good aesthetically. For example, HOAs may have rules against unkempt lawns, the number of vehicles in front of homes, the colors that homes can be painted, décor that’s acceptable, etc.
HOAs also tend to offer amenities shared by owners and their tenants. These amenities may include swimming pools, clubhouses, workout facilities, tennis courts, hiking trails, dog parks, playgrounds and more. Membership dues pay for the upkeep and maintenance of these amenities.
When you invest in a property governed by an HOA, you can offer your tenants access to these amenities, which may allow you to charge a premium for rent. Also, HOA neighborhoods make a great first impression when you’re going through the marketing and leasing process.
The Disadvantages of HOAs
Not every aspect of an HOA is great. For example, your rights as an owner are somewhat restricted when you invest in a home included in an HOA zone. You have limited control over community decisions, budget decisions and the dues that you pay each month — which obviously cut into your cash flow.
HOAs can also pose a general threat to your investment. For example, some condo associations limit the number of rentals in a given community. HOA bylaws may also change, disallowing owners from leasing to tenants.
In these cases, an investor would almost always be forced to sell under duress. It’s hard to make a real estate investment work when you can’t lease the property.
Is an HOA Right for Your Investment Strategy?
So, should you invest in an area governed by an HOA? Only you can answer that question ultimately. In the end, it’s a question of risk vs. reward. Do the benefits of investing in a home inside of an HOA outweigh the drawbacks?
At HUNTAHOME, we have deep experience in the DFW property management space. We know communities around the Dallas-Fort Worth area, and we can provide expert guidance if you want to know more about homeowners associations and investing in homes governed by HOAs.
If you have questions about HOAs or property management in Fort Worth and Dallas, we’re always here to help. Contact us today to learn more about how we can help with your investment strategy.