HOA Rental Realities: 3 Key Considerations for Property Owners

HOA Rental Realities: 3 Key Considerations for Property Owners

Many property owners do not fully understand the rules and regulations of renting out a home within a community with an HOA. This either leads to avoidance or jumping in too soon; both of which could have pitfalls. If you are looking at an investment property within an HOA, there are three key considerations you should know when identifying and renting the property.

Your Right to Rent

A property owner’s right to rent their property, even within an HOA, is a constitutionally protected right. Many people mistakenly view this as a “privilege;” however, courts historically uphold the sanctity of this freedom, requiring substantial reasons for imposing rental restrictions. Notably, courts are cautious in enforcing post-purchase restrictions that could undermine an owner's investment.

However, it is important for property owners to review the community’s governing documents to see if any rental restrictions are already in place. Based on what the state and local laws allow, various restrictions may be in place including short-term versus long-term rentals, an application and approval process, and rental caps.

Ensure Tenant Compliance

Once you have found a property that is a good fit for you as an investor, it is important that your tenant abides by the community rules. Ultimately, as the property owner, you are responsible for ensuring the tenant knows and follows the association rules. The success of your investment and your long-term relationship with the association depends on this.

However, tenants may break the community rules, even if accidentally. To make sure you're covered, you should include a clause in the lease that states breaking the association rules is grounds for termination. Such clauses protect you as the homeowner but can also ease the concerns the association may have regarding tenants using the common areas. Furthermore, if there are any fines because of actions of the tenant or guests of the tenant, the lease needs to clearly state the tenant would be responsible for paying them.

While communities with HOAs have amenities that are appealing to tenants, it is your responsibility as the homeowner to ensure the lease protects both you and the community from any negative actions by the tenant. Hiring a property management company to handle the intricacies of the lease and HOA and tenant interactions may be a worthwhile investment allowing you to be more hands-off.

Maximizing Your Investment

For most property owners, the ultimate goal of a rental property is the income opportunity. Having a rental property within an HOA has additional financial obligations including HOA dues. As the property owner, you may want to include the dues in the rent payments or charge a separate fee.

As mentioned previously, you also want to ensure that the lease explicitly states that fees incurred due to the fault of the tenant are the tenant’s responsibility. Otherwise, those fees will fall to you as the property owner.

While renting out a home within an HOA has its complexities, the community amenities are a benefit that can bring in higher rents. Working with a property manager can help you optimize rent rates.

Is it worth it?

An investment property in a community with an HOA comes with a few extra huddles than a home without one. However, there are a few steps you can take to make the process smoother.

1. Know exactly what the HOA’s governing documents say about rental properties before purchasing the home. If you already own the property, review the governing documents and meet with the board before trying to lease your property.

2. Look for a home within a community that has a community management company. This will often make the process and communication more straightforward for you and the board.

3. Hire a property management company to manage your property. Once you purchase an investment property, you can hand-off the tenant placement, lease agreement, maintenance, tenant communication, and more to the property manager. Your investment becomes hands-off, and you don’t have to deal with the issues that may arise.

If you are interested in learning more about the benefits of property management in southeastern North Carolina, visit wilmingtonforrent.com.


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