Things You Should Know About Homeowners’ Associations
Anyone who purchases a condominium unit, townhouse or any type of development unit in a gated community is under obligation to join a Home Owner’s Association (HOA). In the United States, this association is created by the project developer. It’s purpose is to set the rules and regulations for the community, while also managing the marketing and selling of the homes.
What This Involves?
On purchasing a condo, townhouse or similar property in a gated community, the owner has no choice but to join the HOA. Buyers interested in such a property should be well aware of this as it will mean having to pay monthly fees for the upkeep of common areas and living by the regulations, set forth by the HOA. This can mean noise restrictions or restrictions on owners being allowed to rent to third-parties. These rules are known as Covenants, Conditions and Restrictions (CC&R’s).
Fees
What the monthly fee is, varies from one community to another but often ranges from $200 to $400 a month. As expected, the more upscale a property is the higher the fees will be. For instance, communities with extra amenities like swimming pools, gyms or park areas will mean higher monthly fees for their upkeep.
Some HOA fees can also include utility services, insurance coverage and unexpected maintenance or upgrades. If a major expense turns up, like a new roof or wheelchair accessibility entrance, and there aren’t enough funds in the HOA’s reserves to pay for it then an extra charge to the HOA fee may be added.
Impact Of Policies On Rent
Many HOA’s have a policy of forbidding members from renting their property out to third-parties. This is usually done as a way of controlling the number of people who occupy a single unit. Too many people can put more strain on shared amenities and affect the maintenance costs of the property. Most communities make it a rule that a homeowner must own the property for a set time (usually 1 year) before they can rent it out to others. This rule is in place so as to protect the homeowner (from a depreciating asset) and because of restrictions on the number of units that can be occupied on a property.
Under Management
On first glance, all these rules and regulations can seem very stifling and restricting to a person’s freedom but consider the opposite. When there is little to no management or regulations on a property, it can fall into disrepair and lead to a fast turnaround. Under management is as much to be avoided as over management, a property that nobody cares about maintaining will depreciate in value and end up costing everyone involved.
Budget For HOA Fees
Any HOA fees will be entirely separate from your mortgage payments, so make sure to factor it in before making a decision. A very high HOA fee can prove too much for some and end up costing as much as the property itself. Lay out all your finances and work out the costs over the long term to see if you can afford it.
HOA exist for a reason, they ensure the community is taken care of and all utilities and amenities are provided for. It also protects homeowners from noisy or eccentric neighbors. Make sure you read up on everything about a properties HOA before making any final decision. You don’t want to see any unpleasant rules or regulations just before signing the papers so do your research first.