Are Communities with Home Owners Associations a Good Investment?

By
Real Estate Agent with Keller Williams Lake Norman ~ Cornelius NCREC License #285201

This blog post was inspired by a fellow Active Rain blogger, Karen Kruschka of Prince William, Fairfax ,Stafford County VA Real Estate Service.  She had an excellent blog post about whether HOAs created value for investors.  Being a member of a HOA myself I believe the answer is yes, but with conditions.  Let me explain.

Home Owners Associations are designed to create a uniform set of standards for residents to abide by and, in exchange, residents will typically enjoy a consistent quality of life through that uniform environment.  Residents will pay a monthly, quarterly or annual fee and this fee is used to cover the cost of maintenance of common areas, garbage collection, security and other "common area" expenses, such as water, electricity and in many cases a property manager.  It should also include a "savings" component so that the community can hedge against future large capital expenditures, such as road repaving, common area facility renovations, etc.  If HOAs are managed properly, the value of your community will be protected and will have a generally higher value than similar properties "outside of the gates."  There are exceptions, as I will now explain.

HOA Managed Community

If a HOA is not managed properly there are some serious implications that an investor can experience.  First, if the rules for the aesthetic upkeep of properties in the community are not adhered to or enforced, then the values of the surrounding properties can be negatively impacted.  Who would want to buy a home next to one that needs a complete overhaul!?  Second, if a significant number of members of the HOA don't pay their fees or are in severe arrears, the financial health of the community can be put at risk.  This can cause the basic needs of the community to be neglected, such as maintenance of common areas and community facilities, but can also turn off prospective investors to purchasing a home in a financially dysfunctional community.

Unkept property

It is important that you choose an agent that will point out these important aspects of home ownership to you!  Knowing that your HOA is being properly managed and is in good financial health will ensure that the value of your investment will continue to grow!

 

Comments (4)

Allen 2222
Austin, TX

It is imperative that a prospective homeowner learn how the HOA operates. Some are draconian, some are arbitrary, some are imprudent with funds.

Others are careful and find a good balance for keeping the neighborhood nice without choking the members.

Jan 31, 2012 02:13 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Zack  What a very good definition on HOA's . It is also important for residence to keep informed of what is going on in their HOA's and who and why certain rules have been put into effect . Change such as being FHA and Va approved can certainly affect values in HOA (condo)communities . Be active in your community . Find an agent who knows the basic rules & reg and if they don't will take the initiative to find out

HelpfulHannah

Jan 31, 2012 02:23 AM
Anonymous
James A Browning MRE

The HOA's are really messing up the loan process for the FHA approval in CO. I had two contracts drop because of lack of FHA approval for the condo complex..

Feb 06, 2012 04:13 AM
#3
Anonymous
James A Browning MRE

The HOA's are really messing up the loan process for the FHA approval in CO. I had two contracts drop because of lack of FHA approval for the condo complex..

Feb 06, 2012 04:13 AM
#4