You’ve heard the saying, “one man’s loss is another man’s gain.” That kind of applies to some real estate today. People have lost homes to foreclosure and investors have come in, purchased them, and then rented them back out. It’s helping get rid of the inventory, but such is not the case if you are thinking I’m Going to Buy The Condo and Then Rent It Out!
Many people, investors and owner’s alike, are often surprised when I tell them you can’t just rent your Midtown Atlanta condo out when you feel like it. As part of the Condominium Covenants and Restrictions (called CC&R’s) or the Condominium Declaration, only a certain percentage of homes may be leased out at any given time. Say WHAT?
Most CC&R’s or Condo docs limit the number of homes that can be rented at any given time from as low as 10 percent to as high as 25 percent. So, if you live in a building with 398 homes, at 25%, 99 of the homes in the building may be leased at any given time. Why?
These rules are in place for a couple of reasons. First off, if a condominium building has to many rental homes, it will often be considered an “unstable community” by a lender, and as a result they will not finance any purchases in the building. This hurts both the Seller trying to sell and the Buyer trying to Buy. Secondly, and I’m certainly not bashing renters, but….owner occupied homes tend to be better cared for than by someone that does not have a financial interest in the property. Sorry….it’s a fact!
I recently took over management of a condo for an absentee owner. He’d been getting his checks for 3 years, what could be wrong? $5,000 later the condo was finally ready to rent again. But that’s another story.
When you purchase a condominium, I always tell my Buyers to place their name on the Rental WAIT List as soon as possible. Yes, you heard me right….Rental WAIT List. In the Atlanta condominium market, the length of time it can take you to get a leasing permit can range from THREE TO FIVE YEARS! You may not be planning to move or rent your home, but things change. And in 4 years from now, you might be moving, or getting married and needing a bigger place, and it would be nice to know you have the option to turn this condo into an investment property while you purchase another home.
So, think twice before you say, “I’m Going to Buy The Condo and Then Rent It Out! NOT!
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5 Comments on Real Estate FAQ's | I'm Going to Buy The Condo and Then Rent It Out! NOT!
I think that limited rental rate also helps protect the condos in the "getting a loan approved" category too. Rently we had one turned down for financing because it had too high a percentage of rentals.
It only makes sense to limit the number of rentals to protect homeowners who may want to sell. Buyers with loans would find it difficult to buy. Most of our buildings won't allow the owners to lease for one year, and many do have a cap on the amount allowed to be rented at one time.
This is great Thom. Your suggestion about getting the owners name on the list -- because you just never know -- is spot on!!
Thom-lease caps are important to the well being of a homeowners investment. Unfortunately I live in a building that took to long to put one in place. As a result there is no FHA or VA financing available for buyers. Values plummeted and we are over 50% investor owned. We have a lease cap now and all current buyers must be owner occupants. When asked when they can rent their units the answer is similiar to yours 3-5 years and maybe longer. Put your name on the list and hope an original owner who is grandfathered in doesn't bump you down again.
Tammy: Yes that is one of the major reasons...lenders don't consider it a stable community with to many rentals.
Jane: Wow...a year before you can lease! That's interesting. Most of ours have waiting lists. You buy, you put your name on the list. Average wait is 3-5 YEARS TO CLEAR!!!
Carla: Absolutely!
Cindy: Sounds like you need to plan to live there for awhile?