3 Ways HOAs Kill

In real estate, often it's the smaller details that will kill a deal. It’s not usually a house in a flood zone, bad foundation, and no roof but the combination of all.

Here are the 3 reasons to avoid acquiring real estate within HOAs.

1. It's all about the money. In most real estate transactions in my experience, a good deal turns into a bad deal in the form of thousands of cuts. Most buy boxes will include a net profit and in this day in age 200 dollars per door is a good number to shoot for. Now depending on the HOA these monthly fees add up to ten if not hundreds of dollars monthly, killing deals.

2. Welcome to the civil war. I am currently going through this with my long term rental property in AZ. I've always heard horror stories about charging insane fees along with monthly dues. Furthermore, I would challenge to see how many HOAs and residents mesh together. There tends to be a load of emotions that get involved, and in an industry that lives and dies by numbers. You're better off sourcing a deal instead of arguing about light fixtures or curb appeal.

3. Limits to creative holding strategies. While doing transactions, you make your money when you buy. You maintain the ability to play the game of investing by keeping your head above water. Your exit ensures you will be able to pivot if required into a better deal or if you run into hardship, it won't ruin you. Limiting any of these is like tightening a rope around your neck while doing a trick on a chair. For instance, I am required to have at least a 6-month lease with any tenants in my property. I have to register with my HOA who is in the house on top of handfuls of other hoops to jump through.

In conclusion, real estate is a forgiving asset class, allowing you to take on debt at a fixed rate for 30 years. Over those 30 years it's guaranteed the market will shift if not the whole economy. The ability to maintain flexibility in your investing is what will save you. Keep the power and control in your hands and do yourself the favor of avoiding HOAs.