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  1. #12
    Join Date
    Dec 2008
    Posts
    1

    Default Re: HOA issues - banning renters?

    I recently considered buying a condo or townhouse in Albuquerque and found out from a lender consultant that condos are no longer a good investment as rental properties (or even as resell properties).

    I was informed that lenders are looking very closely at HOA's and that loans will be denied for condos whose HOA's allow for a high percentage of renters to owners.

    This will mean a couple of things.

    One, selling condos will get harder if the HOA does not meet the lender's requirements to grant loans to buyers.

    Two, HOA's are going to have to lower their ratio of renters to owners resulting in passing hard and fast regulations against rentals sooner than later.

    My lender consultant told me that in Albuquerque, only ONE condo complex was qualified within his list of lenders and all others are going to run into the problem where the owners cannot sell due to lack of lending options for buyers.

    Is anyone here aware of his problem elsewhere?

    I'd like to know how pervasive this is around the country at this time.

    And David, do you know if this is the reason why your HOA is changing its rules in mid-stream?

    Thanks
    Honor

  2. #13
    Join Date
    Mar 2007
    Location
    Las Vegas
    Posts
    1,154

    Default Re: HOA issues - banning renters?

    Quote Originally Posted by Honor View Post
    I recently considered buying a condo or townhouse in Albuquerque and found out from a lender consultant that condos are no longer a good investment as rental properties (or even as resell properties).

    Honor
    I think the price matters more in determing an "investment" and not the type of property it is. If I can buy a condo for $30,000 and rent it out for $900 I don't even have to run the numbers to tell you that's a great investment. (As long as the rest of the fees are not outrageous..)

    In Vegas we have $50,000 condos that can rent out for $600+ a month right now and you can get loans on the ones in developments that do not have litigation such as construction defect lawsuits on them.... or... (see below the next quote)....

    Speculating on future appreciation with the current conditions is not a very good way to determine an investment right now in my opinion. (What they "used to sell for" certainly is not.)

    It's price and positive before tax cash flow using the lowest recent rents for safety in our calculations in case things get worse for the short term in my book.

    I was informed that lenders are looking very closely at HOA's and that loans will be denied for condos whose HOA's allow for a high percentage of renters to owners.
    That's always been the case for Fannie Mae/Freddie Mac, VA and Hud guidelines. Over 50% ownership by investors in one condo community will cause problems with the majority of the loans available. Nothing new.

    I'm not a lender but unless things have changed since doing a condo development back in late '05 / early '06... we lived by these rules when it came to sales and insuring that future buyers would be able to get loans for the units.
    Specializing in the Master Planned Communities that make up great Las Vegas Real Estate including Summerlin Real Estate. Check out my blog about the fascinating and constant changes always taking place with current Las Vegas Real Estate Trends...

    Paul Francis
    Berkshire Hathaway HS | Nevada
    Your Home for Las Vegas Real Estate
    702.592.3058

  3. #14
    Join Date
    Jan 2005
    Location
    Orland Park/Homer Glen
    Posts
    3,342

    Default Re: HOA issues - banning renters?

    I just read a post somewhere about this happening in Florida. This was one of the places we were thinking of purchasing a condo for short-term rentals (in Kissimmee or Orlando near Walt Disney World). Supposedly, if there are more than 50% rentals in a complex you cannot get financing.

    What a nightmare for these condo owners - what are they going to do - pass them down to family members or offer owner financing or hold out for cash buyers. Another reason for prices to fall even more.

    Paul - I've never heard of this and the post I read made it sound like something new (the post wasn't old but I can't remember where I read it). I guess it doesn't affect me out here in the 'burbs - even though we do have investors - this has never come up.
    Last edited by judyo; 12-03-2008 at 05:57 PM.
    Money Magazine says that Orland Park real estate is one of the best places to live in the U.S. Check out Homer Glen homes if you're interested in living in the newest Chicago suburb. Next door, Lemont homes are the priciest in the southwest suburbs and have held their value, even appreciating while prices in other areas have gone down.

  4. #15
    Join Date
    Mar 2007
    Location
    Las Vegas
    Posts
    1,154

    Default Re: HOA issues - banning renters?

    Quote Originally Posted by judyo View Post
    I just read a post somewhere about this happening in Florida. This was one of the places we were thinking of purchasing a condo for short-term rentals (in Kissimmee or Orlando near Walt Disney World). Supposedly, if there are more than 50% rentals in a complex you cannot get financing.

    What a nightmare for these condo owners - what are they going to do - pass them down to family members or offer owner financing or hold out for cash buyers. Another reason for prices to fall even more.

    Paul - I've never heard of this and the post I read made it sound like something new (the post wasn't old but I can't remember where I read it). I guess it doesn't affect me out here in the 'burbs - even though we do have investors - this has never come up.
    Back during the wannabe investor days we had to keep a really close eye on this for Vegas with all of the speculators.

    The sales line by the builders was to maintain a really high constistency for the community but the reality was screwing up the financing pretty much meant death in killing the majority of the loan programs that would be available. (Believe it or not... there were some guidelines...)

    One of the main reason why at one point new home builders out here were not selling to investors because there were so many investors that wanted to buy all they could with the low risk financing available... (Did not stop them... just slowed them down and kept it from getting even worse then what eventually happened.)

    Sorry to get off of the topic since Dave's question sounds like it specifically is more a quality of life for the community issue and fear of what poorly managed properties do to a community. (I have no shortage of those stories either..
    Specializing in the Master Planned Communities that make up great Las Vegas Real Estate including Summerlin Real Estate. Check out my blog about the fascinating and constant changes always taking place with current Las Vegas Real Estate Trends...

    Paul Francis
    Berkshire Hathaway HS | Nevada
    Your Home for Las Vegas Real Estate
    702.592.3058

  5. #16
    Join Date
    Apr 2007
    Location
    Chicago
    Posts
    91

    Default Re: HOA issues - banning renters?

    UPDATE: so, the HOA rep told us that we had an opportunity to pitch a hardship exception to the board to allow us to continue renting the unit. I drafted a beautifully written 4 page letter, attached a snapshot of financials and even a photo of my wife and I (to personalize the request) and.... we were shot down!!

    As it turns out, the HOA rep told us the board could make a hardship exception to the renting rule in the community, however, SHE WAS WRONG. The response from the board is that they have no mechanism in the bylaws for granting a hardship exception for the leasing ban in our community.

    So, now the question is how long will they wait until they start any action against me...

    I suppose my best course of action will be to get an injunction against the HOA from moving to evict my tenants while I work to petition the homeowners to overrule or modify the ban. The problem is that it is a "developer board" which means the hoa directors are employees of the builder and it has not been turned over to the homeowners. I need to request the documentation that shows how many undeveloped lots are in the neighborhood and how many homeowners exist..

    For example, if there are 300 homeowners and 700 undeveloped lots, the builder gets 1 vote for every undeveloped lot... so even if I convince all 300 homeowners to modify the ban, the builder can still squash it with their single, 700x powerful vote.

    At this point, I intend to drag it out as long as possible and keep the tenants in there. If they eventually win an eviction, I can probably even appeal it.

    Bummer!

    -dr

  6. #17
    Join Date
    Mar 2006
    Location
    Outer Banks
    Posts
    1,141

    Default Re: HOA issues - banning renters?

    The developer being in charge could be a plus for you.

    Without the rental income you can not afford the property, so it will go to foreclosure. The last thing the developer wants to see is a(nother) foreclosure in their neighborhood.

    Make sure they understand the consequences of their actions and maybe they will not enforce the rule.
    Call Greg Cremia at Shore Realty 800-647-1868 for all of your Outer Banks real estate needs.

  7. #18
    Join Date
    May 2004
    Location
    San Antonio, Texas
    Posts
    1,707

    Default Re: HOA issues - banning renters?

    I am glad that I am not dealing with your situation. But, I am not sure that this would be allowed in Texas without a specific law allowing the HOA to prohibit you from renting it out; or change the rules you agreed to when you bought it mid stream on you. (Without you affirmatively agreeing to it.) (But, I may be wrong.)

    As Texans, we hold dearly our 'property owner's rights'. And as far as I know that includes the ability to rent it out if we so desire. (However, this is no way a legal opinion.) Just for my own benefit, I am going to talk to one of my real estate attorney friends to see what he has to say.

    I hope things work out for you.
    Randy Watson Texas Real Estate Agent
    Mission Realty - San Antonio Texas
    www.satxproperty.com

  8. #19
    Join Date
    Dec 2006
    Location
    Aurora, IL.
    Posts
    311

    Default Re: HOA issues - banning renters?

    I'm not so sure the HOA can take action to evict your tenant. They may be able to fine you and put leins on your property and do other things, but eviction might be out of their realm of power.
    Eric Rogers - Broker - Century 21 Affiliated Pro-Team
    Serving home buyers and sellers shopping for Illinois real estate - www.illinoislandandhomes.com. I also work extensively with buyers looking for homes in Aurora www.aurorarealestate-il.com as well as owners who are looking for an agent to sell their home in Naperville Illinois www.napervillerealestate-il.com

  9. #20

    Default Re: HOA issues - banning renters?

    Yes, please keep us posted. It seems that they would be grandfathered in but Tampa mentions section 8. What is section 8? I have a feeling the HOA might have some traction here though I see both sides here.
    Work with a qualified, dedicated agent for your Beaufort SC real estate purchase. And if living in the Pee Dee region of South Carolina, make sure to visit one of the well respected Florence SC dentists for all your oral care needs..

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