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If you are looking to buy a townhouse or condo, you'll find that HOAs have all sorts of policies about rentals. If you plan to live in the unit, and not rent it out, what do you think is the best policy? Here are the ones I have seen or can think of:
-No rental restrictions. Predictably, this results in a lot of renters. This is the fullest preservation of property results, but may result in the development being less pleasant to live in. (In fact, some developments turn into unrestrained blight.) When the rental ratio gets too high, some lenders may not want to make loans. On the other and, if a housing crash hits, investors may buy units that owners can no longer afford.
-Complete ban on rentals. This results in a community that is highly invested in keeping things nice. On the other hand, owners who need to move or who run into financial troubles may find themselves with few options other than to allow foreclosure. I have noticed that these communities tend to be cheaper, perhaps because investors are eliminated from the buyer pool. You're really limited in how you can use the property that you supposedly own. Ironically, I've heard that some lenders don't like to get involved with these properties -- perhaps some of the experts can chime in.
-Complete ban on rentals, with hardship exemptions. In reality, most HOAs with rental bans probably allow for hardship exemptions. But the board has the right to say "no." Your financial future may rest in the hands of a board which may or may not be competent and reasonable.
-Rental cap. Some developments only allow, say, 20 percent of units to be rented out. Anyone else has to get on a waiting list, or get a hardship exemption. In some ways this seems like a good compromise, but effectively, if the community has surpassed the cap, it's the same as a rental ban.
-12-month residency requirement. Some communities require that the owner occupy the unit for a year (or some other duration) before being allowed to rent it out. This discourages professional investors. This seems reasonable in some ways, but in other ways it's the world of all worlds. The number of renters can creep up quickly, but the policy may preclude professional investors from buying distressed units.
-Other?
I am interested in buying a townhouse or condo, but I have not decided what kind of policy I like best. I think this is a big disadvantage of these kinds of properties -- any route you choose involves major compromises.
Rentals with a 6 month minimum lease, that must be submitted with a small fee to the HOA.. And that gives the hoa a chance to insure the new renters have seen the rules and can't simply claim I didn't know about the ________ (dog, cat, parking, garbage) rules.
Rentals with a 6 month minimum lease, that must be submitted with a small fee to the HOA.. And that gives the hoa a chance to insure the new renters have seen the rules and can't simply claim I didn't know about the ________ (dog, cat, parking, garbage) rules.
Another use for a minimum lease duration is to prevent short term rentals. This is especially true in 'touristy' areas. In many locations the 'rental' market is shifting to STR's as they can be far more profitable but obviously bring along a whole slew of potential problems.
I am interested in buying a townhouse or condo, but I have not decided what kind of policy I like best. I think this is a big disadvantage of these kinds of properties -- any route you choose involves major compromises.
When you buy into an HOA you give up freedom of choice on a lot of levels, not just whether you can rent it out or not.
Pick the poison that you are most comfortable with.
Most condos limit rentals to 20% as mortgagers do not see a building as residential if over 20% of the units are rented.
The lenders have the percentage restrictions because most HOAs do not. I have seen some no rental communities valued/selling for about half of non restricted communities that were quite similar. OTOH, there is a need to restrict hotel type occupancy in residential communities.
I would have 15-20% rentals. Life is ever-changing and many nice people are "mobile" these days and must move to where they get new jobs, or their aging parents need help, etc. "Forever homes" are not for everyone nowadays. Parents get sick and need help, you go help them for a year or 2, and it's silly to let your condo remain vacant.
I might also add that 1-2 of those units should be set aside for older persons, even if that is section 8 and/or handicapped equipped. The lovliest people I have met in rental communities were older persons, like a stroke victim i know who is generous and kind.... and another man who teaches all the kids how to play chess. They are often mature and wise and well-behaved, and a real treasure to add to your neighborhood.
I've lived in many rental communities, condo communities, and gated communities over the years (despite owning my own home in the woods) due to travel for work, etc.
I personally like a mixture of different kinds of people and ages in communtiies.
Restrictions other than that would be to maintain a certain look-and-feel in the community, we all know what that entails.
Too many restrictions and people won't want to live there.
Most condos limit rentals to 20% as mortgagers do not see a building as residential if over 20% of the units are rented.
Most? This sounds like something that may vary by region. Do you have a source for such a claim?
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