|Do you realize that you might be prevented from renting your investment home? Prohibiting property owners from leasing their properties is a trend that is growing increasingly popular with some developers and many Homeowners' Associations (HOA).|
It's rare that you can buy a new home in a development that does have a HOA. As a homeowner you are bound by the HOA restrictions found in the Covenants, Conditions and Restrictions (CC&Rs).
The CC&Rs regulate your use of your property, restricting everything from the color of the house, window coverings, holiday decorations, sports courts, pets, to landscaping and etc.
One of the most recent restrictions that builders are including in their CC&Rs is a restriction that prohibits the homeowner from leasing their property. Builders have a provision in their sales contracts stating that the home will be a primary or secondary residence and that the purchaser will occupy the home. The owner is strictly prohibited from renting the home.
Why this trend? The idea is to limit the number of rentals in a subdivision because lenders believe that a high number of rentals in a community affects the value of the property and can erode the security of their loans.
Existing HOAs like the idea of no rentals and there seems to be a growing movement to amend their CC&Rs to add the "no leasing" provision.
The new homebuyer should be made aware of the no leasing restriction when they buy. But what about the investor who buys a home a few years later? If the investor fails to read and understand the CC&Rs he or she may end up owning a property that they cannot rent.
You can't count on the home seller alerting you to the restriction. They may be the third or fourth owner of the home and not even be aware of the restriction.
Oh sure, you could buy the home, rent it and hope you are not discovered violating the CC&Rs.
However, anyone who has ever dealt with a HOA soon discovers that there are always a few other homeowners with an eagle eye out for the slightest infraction of the CC&Rs. They delight in notifying the HOA management company,,, and the management company is bound to investigate and enforce the rules. For you the investor is no appeal... and there is no recourse.
This is a strong reminder that every investor should have a clause in every purchase contract that says the purchase agreement is contingent upon you receiving, reading and approving a copy of the CC&Rs.
This is a potential ulcer-creating situation that no investor can afford to ignore.
About the Author:
Mark Walters is a third generation real estate investor who shares his experience from his Web sites: http://www.CashFlowInstitute.com http://www.ThePowerLetter.com
Small Business Tax Deductions for Year End 2004
As a small business owner, it's wise to familiarize yourself with some key deductions that may reduce your tax bill for 2004. Employee Benefit Plans - You may deduct contributions to employee benefit plans (such as health insurance plans and...
“Why Stock Is More Risky Than Options!”
Our trading preference is stock options.
But you have probably been told or read that options are risky. Even worse, that you can lose your shirt trading them!
Well, what is the truth?
Let’s take a look at stock ownership. What can...
How To Set Goals Like Bill Gates
I just got back from a seminar I spoke at in Texas this weekend and I want to share with you a 'theme' I heard from
3 coaching clients I was able to get together with there.
What was so interesting to me is that ALL 3 of them said the EXACT ...
One of The Best New Business Opportunities May Be Right there in Your Home - a New Daycare Business.
The day care industry is expanding. There are now more than 100,000 licensed child-care centers and 250,000 licensed family day care homes across the United States.
The market for day care increases every year as the working mother in society...
The Average Profile of Customers Opting for a Payday Loan Cash Advance
Payday loans are loans of a small amount, taken for a short duration of time. Payday loans are generally meant to be paid off on the next payday.
Payday lenders loan out thousands of dollars every week to people who are in dire need of money....