Friday, May 30, 2008

HOA's Should Love Investors - But They Don't

I was reading more about the "mortgage crisis" and how it is affecting HOA's. With many people buying more house then they can afford, many HOA's are not collecting enough dues because the HOA dues expense is a bill that people are not paying. Some state laws allow HOA's to put a lien on a house so they can collect past dues when the house is sold. Some states, like Texas, allow the HOA's to foreclose on a house for any past due amounts, and we have seen this on some past due amounts as low as $200.00.

HOA's should love our clients because our clients pay their dues! Our clients can do this becasue they have income coming from the property. Another reason HOA's should love our clients is because our clients shrink the market of available homes, therefore, increasing values. HOA's are supposed to exist to assist all the homeowners in protecting the value of their asset. This goal should not discriminate against investor owner's. Problems occur because the HOA's are run by people, and people are not always that smart about making decisions in their best interests.

There is often a prejudice against "renter's" in residential neighborhoods. People who own the home they live in feel that renter's will not have the same common interest to maximize the value of the home they live in. This is true. People take this prejudice and try to keep renter's out of their neighborhoods. I call these folks "unenlightened". What these unenlightened folks fail to realize is their peers are not the renter's, their peers are the other property owner's, who I call the investor/owner. An investor owner actually has an even higher level of interest in making the asset appreciate in value, since they are only in it for the money.

Imagine a scenario where a neighborhood was to eliminate all renter's. This would force all the investor/owners to sell the homes they own. Most neighborhoods have 15%-30% of the homes in the neighborhood as rental properties. If all these homes came on the market at the same time, and at the same time as people who are trying to sell their home for other reason's, the effect would be a devastating blow to the value of all the houses.

So - what should you do with this information I just laid out? Everyone can have a positive impact just by talking. Talk to your friends, talk to your neighbors. If you do not not have an HOA in your personal neighborhood, maybe a friend does. Create your own buzz about how renter's and investor's add value to all residential neighborhoods. People do not always think through an issue before making a decision, they go with what they hear on the street. You are a person on the street, so change the views.

There are many people where home ownership is not right. Don't try to talk your friends into buying a home for their own residence if it is not right for them. I have told many friends, keep renting, but become a landlord, it has worked out well for many.

I would love to hear your thoughts on this post. Click on the comments link and send me a note.


Anonymous said...

Interesting point of view, but it seems a little bloated. The reason HOA's don't like renters, is because a lot of renters are trashy. They don't care about a lot of the rules, because they can just go somewhere else. Renters also know that the owner/landlord will absorb a lot of gripe because he needs the renter to stay in the rental property.
Unfortunately, renters such as the one I have just described are everywhere. They take their toll on the opinions of home owners and HOA's alike. It makes it difficult to sell the opinion that renters are good for a neighborhood, even though there are renters like me, who treat the residence and neighborhood as if it where a home they own. I personally take pride in myself, where I live, and the community, but I'm afraid once people find out that I'm "just renting" I get put out of the circle. So, I hope that more people can take pride in who they are.... but for now... I won't tell anyone I'm "just renting" anymore.

Anonymous said...

Interesting blog. I can understand why there is a "stigma" to renting a home.....there ARE a lot of unresponsible renters out there.

However, I find myself conflicted with my own embarrassment of my neighbors "finding out" we rent. We have lived in our lovely home for almost 4 years. I have to say, our yard is the prettieston the street. People come up to the door and knock and ask us about our flowers and landscaing and comment on how pretty it is. We have improved the home in multiple ways. I say "home" because that is what it is. Our HOME. Yes, we rent.....but in this economy right now we are VERY grateful we made the decision to do so.

The internal conflict comes in thinking my neighbors think we are "lesser" than them because we rent; and the flip-side is that some of our neighbors think we are not very "smar" because we have spent a great deal of our own money on upkeep, landscape, interior painting, carpet cleaning, yard care...and yet the home isn't even "ours". This is where I beg to differ. The investment we put into this property that we are "just renting" (even though we've been there 4 years and are on a 2 year contract with no future intentions to move) is that our "home" is a beautiful, relaxing place to live and raise our children, and a source of pride.

If someone purchases a home and "invests" in landscaping, interior paint, etc., and then moves out in a year or two, this money is not recouped. We have recouped it in our own pleasure of taking care of it and enjoying the finished product.

So why am I "embarrassed"????

Unknown said...

As the current housing/credit situation continues to devolve I hope many people will come to understand that it is OK to rent. In Europe there is no stigma to renting, as it is normal for people to rent. Part of the difference is that in America people have used their home as a required investment towards their retirement. Well, the recent turn of events may help kill that idea that this is always true. If you do the math (after studying current tax law) it makes more sense to rent the home you want to live in and buy an investment property towards your retirement so someone else will be living in the house you actually own.

Francis said...

I believe this blog has a lot of truth in it. It is balanced and invites reflection. Especially in times like now, investors are important to an HOA. Many HOA's throughout the US are in deep trouble right now, and the homeowners who do pay their dues are suffering for all those who give the keys back to the bank. Investors do fill in a void and help keep the complex running as it should. Apartment complexes are not necessarily run down, just because there are only tenants in them. It depends on the management...
I guess, like everything in life, a balance is welcome: too many properties rented in a complex sure is not welcome by the owners, but there can be a fair percentage of them rented, with tight management, and it will not hurt the community. Banks like to see at least 60 to 70% of owners in a complex; under that number, they balk at lending in it. This is a reference.
Francis - Homeowner, and landlord. - and Realtor.