HomeOwner Associations- Love or Hate Relationship
In this episode Nic and I are talking about HomeOwner Association. I get asked my opinion of them a lot and my answers depends on the purpose of the property.
If the property is going to be your primary residence and you want to live a quiet lifestyle and don’t mind living under the rules of the community then a homeowner association (HOA) is a good thing for you. They keep the property and the values uniform. They keep the lawns in good shape, service vehicles out of the driveways, houses uniform in appearance and common or community areas maintained and in good shape. They can control the paint colors of the homes, organize and community wide yard sale and organize to help the neighborhood and make it a great place to live. The homeowner association will oversee that the neighborhood is a great place to live and the homes are all uniform. I have even seen them maintain bank-owned or neglected properties until a new owner is in place.
Like anything a homeowner association can also be bad and make everyone living there miserable. Here in Florida we have more homeowner associations than most areas and while most are good, some are not. A common homeowner association problem that I have seen is that some retiree moves into the neighborhood, usually by the gate and decides he owns the whole neighborhood. They proceed to make friends or just plain bully other neighbors into voting them HOA president. Once their regime is in place, it’s when the real nightmare can begin. Under the guise of doing their ‘elected job’ they proceed to make even the smallest infraction a huge deal. They get their torches and pitchforks and begin to mob terrorize the neighborhood. The tyrant typically has a group of fiercely loyal supporters that helps with the fear and terror campaign throughout the neighborhood. Neighbor turns on neighbor. It makes the owners live in fear.
This happened to the neighborhood next to where I live. It got so bad that the association president would follow the trash truck through the neighborhood each week and if the cans were not removed nearly immediately you got a notice in the mail with a picture. The neighborhood was made up of working people what would bring the trash cans in when they got home from work. Apparently, that was not enough for this guy. Finally, at a board meeting the entire neighborhood showed up and disbanded the entire homeowner association. Now while this is an extreme case, I frequently, get calls for homes I have listed for sale by the HOA president notifying me that the grass is 1 inch too tall or the shrubs are out of violation. When I suggest they call the owner, they’d rather be passive-agressive about it and avoid the actual owner.
We have a lot of condominiums here in Florida and their associations are similar, but a big issue with these associations is the finance. You can get someone with no real financial background making decisions for a large commercial building that could have serious consequences for the owners. Capital improvements for large condo building like roofs or resurfacing the parking lots can easily be hundreds of thousands of dollars and not budgeting for the repairs over time can lead to a special assessment to the owners. I have seen this also, you suddenly get a letter in the mail that you owe $8,000 for some building improvement that the condo association did not budget for. My advise, get a professional company to manage the condo association and maintain the budgets.
Personally, I don’t like homeowner associations for my investment properties. However, if I owned a short term rental property near Disney or a class A (up scale) property, I’d think differently. Your relationship with the association depends on your investment plan, area and type of property. Just be aware before you buy a property in one of these areas that they also have a cost associated with them that can reduce cash flow.