With increasing frequency, many of our clients are making their first move into a condo or townhome within a homeowners association, or an HOA. In some cases, we have clients whose second home is situated in an HOA. In fact, there’s a 20% chance you personally will be in an HOA at some point in your life.
There are certain advantages to living in an HOA community. They have a range of amenities and, because the association has rules for yard upkeep, all the homes in the community look dazzling. That leads me to my larger point, though: Your HOA will have restrictions and covenants that you’ll be asked to abide by.
You’ll find your specific HOA’s set of restrictions and covenants in the CC&Rs. I can’t stress enough how important it is to read through those and make sure you’re fully informed of the rules your HOA has laid out. In fact, it may even benefit you to go to attend one of the meetings and gain some insight from a member or two.
It may very well be that the members have voted in some stiffer restrictions, while other times, they take a more relaxed approach to their policies.
It’s also incredibly important to make sure you know what fees and dues you’ll be required to pay and be wary of the fact that you may have to pay an HOA transfer fee—that’s something that isn’t always made known in the covenant. We’ve seen this particular fee run anywhere from $99 to as much as $1,500.
Familiarize yourself with the history of your HOA as it relates to your costs: Do fees go up by a gradual 3% annually or have there been spikes in recent years? The age of the building you’re moving into and any assessments that will be made to cover big-budget repair costs should all be considered. Perhaps the roof will need to be replaced or your HOA is installing new elevators. Whatever the case, these are things worth inquiring into.
Next, review your HOA’s budget. Think of it this way: If you were running a business, you’d want to be safe in the knowledge that it’s healthy and you have money in the bank should an emergency or pressing matter arise. You don’t want to have a business that’s on its way to being insolvent and bankrupt. When you’re moving into an HOA community, you’ll want to enter with this same mindset.
Once you’ve established what use you want to get out of the property, whether it’s a longer-term investment or for short-term renting, find out what the HOA allows in terms of rentals. In the event that the community has too many properties being rented, you may be unable to sell your unit.
All in all, it’s important to have a professional at your side and, together, you can evaluate all the specifics of the HOA you’re looking into. If you have any questions about this or anything else related to real estate, don’t hesitate to get in touch with us. We’re here to help!