January 20, 2017
Buying a Rental Property in a Gated Community: Property Management in an HOA Neighborhood
As my parents have acquired more and more vacation homes over the years, they have always shown a preference for condominiums, gated communities, or homes that are part of a homeowner’s association, or HOA.
They’ve always favored HOAs because they provide you with many of the same benefits that you would typically see with a condominium, but you have more freedom because you own the entire structure and the land on which your home is built.
Each HOA is unique, but gated communities tend to be operated and managed in a manner that’s more similar to a condo complex. You may have access to amenities, such as a pool area, tennis courts, fitness center, and business center. It’s not uncommon for there to be a security guard who operates a gate at the entrance to the neighborhood while security officers patrol the area.
Gated community HOAs frequently secure contracts with lawn care companies, house painting companies, and property management firms that oversee the entire neighborhood or offer a significant discount to residents who opt to use their services.
Some give the homeowners the freedom to choose their own lawn care company or house painting company, while others handle this on your behalf, deducting the fees from your annual HOA payment. In the latter type of neighborhood, the HOA typically oversees common areas, lawn care and landscaping, and sometimes the home’s exterior, while the homeowner is responsible for the interior.
The very nature of an HOA can add some complexities to the equation when you own a rental property. It’s important to understand what services are provided and what services your property manager will need to oversee.
Owning a Vacation Rental Home in an HOA Neighborhood or Gated Community
When buying a house in a gated community or another neighborhood that’s overseen by a HOA, you must ensure that you’re allowed to use the property as a vacation rental. Some HOAs do have restrictions that prevent you from offering your home as a vacation rental.
It’s also important to ensure that the seller is current with the HOA fees. An HOA does have the power to impose a lien against a property in an attempt to recover any owed HOA fees, and they generally do not care who owns the property. It is standard for an HOA to file a lien against a home prior to a sale transaction to maximize their chances of getting paid when the property sells. This doesn’t always occur, though, so it’s vital that you verify that the seller is current with the HOA fees.
Working With a Property Manager to Oversee a Home in an HOA Neighborhood
If your HOA does allow you to use your home as a vacation rental, your property manager will become an invaluable asset because HOAs tend to have many rules and regulations. You can work with your property manager to help you find guests who are likely to follow the rules.
Your property manager can also work to draft a rental agreement that includes terms that allow you to seek compensation in the event that a fine is handed down as a result of a guest’s actions.
So what are some of the most common HOA-related issues you’ll need to address with your property manager? Consider the following points.
Parking-related fines are fairly commonplace, and it’s a problem that tends to be more frequent when you have guests who are not familiar with the HOA’s rules. Some HOAs have assigned parking spaces and special “guest parking” areas, while others have bans on on-street parking or limits on how many vehicles can be parked in a driveway. These rules must be clearly conveyed to your guests, so this is where it’s helpful to have a property manager. Not only can the property manager let guests know about these parking rules when they book your home, the manager can also greet guests and discuss the rules upon arrival.
It’s important to remember that many HOAs hand down fines that increase with each offense. Therefore, a single parking infraction could cost you a couple hundred dollars or more and the guests may be tasked with retrieving a towed vehicle — definitely not something you want to deal with during your vacation! For this reason, it’s really important to work with your property manager to address parking issues before a problem arises.
An increasing number of HOAs, gated communities, and condominium complexes are going smoke-free. In these neighborhoods, smoking is not permitted indoors or outdoors. Those who violate the rules can be subject to significant fines (which again, tend to increase with each subsequent offense). Many HOAs have security guards who patrol the neighborhood looking for violations and neighbors may even report your guests to the HOA.
A smoking ban can be a major problem if you rent out your vacation home to guests because some are bound to be smokers. You’ll need to work with a property manager who can thoroughly screen prospective guests, explaining that smoking is not permitted inside or outside, and emphasizing that violations can result in major fines. Your property manager can also ensure that your rental agreement allows you to charge guests for any unpaid smoking fines. You may also include a clause that allows you to confiscate the guest’s damage deposit if your property manager discovers evidence that a guest was smoking indoors.
Some HOAs do allow vaping since there is no odor and no fire risk. So you may wish to inquire about this if you’re uncertain about your HOA’s stance on vaping.
A number of HOAs have age-related restrictions, such as in the case of 55+ retirement communities, which have restrictions on children. So this is another key consideration because an inability to rent to families can impact your income potential.
If you do opt to purchase a vacation home in a neighborhood that has age restrictions, your property manager will need to screen guests fairly intensively to ensure that all guests are over age 18.
Some HOAs allow children to stay as guests for a limited period of time (i.e. no more than three consecutive nights or seven days out of every month). So if children are allowed to stay as guests, then your property manager will need to be aware of this so that he or she can ensure that the guests do not violate these rules.
HOAs tend to be stricter when it comes to cracking down on noise restrictions, so this is something your property manager and your guests will need to consider. Your guests are on vacation, so many are keen to enjoy a few drinks and things could get a bit loud or even rowdy. This is more common with certain demographics, such as college students. So your property manager will need to screen guests, and you may opt to avoid renting to college students and “Spring Breakers.”
Other HOA Considerations
Since many HOAs provide services such as lawn care and some other aspects of exterior maintenance, you will need to determine precisely what is and what is not included so you can work with your property management firm to craft a custom service agreement. Many of the HOA-provided services are things that a typical property manager would often oversee, so your service agreement will need to be customized to some degree. It’s important that you hire a property manager who is willing to work with your HOA. This cooperative approach is key to avoiding turmoil.
HOAs offer many benefits to homeowners, but there are also some challenges that you may need to overcome as a vacation rental owner. Your property manager will prove to be a valuable asset, allowing you to maximize your income while ensuring that your guests comply with the HOA rules and regulations.
If the neighborhood has security guards who address noise complaints and other HOA compliance issues, it’s advisable to ask your property manager to forge a connection with the security team, asking to be notified of any issues at the property. This will place your property manager in a better position to address any potential problems.
If you’re in search of a property manager, make your way to Rented.com, a site that matches homeowners with property managers. Many of the property managers Rented.com works with offer an income guarantee that allows you to receive a flat monthly sum regardless of actual booking rates. Sign up for free and get quotes from some of the nation’s best property managers.