Have you ever asked yourself – Are HOA fees worth it? Well, you are not alone. This is one of the common questions asked by property owners and real estate investors all over the world. In fact, a Google search for this term will generate over 85 million results.
What does HOA cover? What are the average HOA fees? Are HOA fees worth it? These are some of the questions that will be answered in this article.
Related: The Best Tips for Real Estate Investors to Deal with HOA
What Is an Hoa?
HOA is an acronym for ‘homeowners’ association’. When you buy a single-family home, condo, apartment, or townhouse in a ‘planned development’, you are likely to find an HOA structure. A homeowner’s association is simply an organization that works towards maintaining a cohesive and clean environment in the neighborhood. While HOAs vary in composition and size, they are made up of property owners who are elected for various roles.
A typical HOA consists of a president, vice president, secretary, and treasurer. The president and his vice are responsible for announcing agendas, leading meetings, and maintaining order. They need to be very conversant with the CCRs as well as the governing documents. The secretary’s work is to organize official HOA records and maintain the meeting’s minutes. They review and update documents and avail them to the community members. Finally, the treasurer is responsible for collecting payments from community members and managing financial records. They are also tasked with creating a budget to pay taxes, insurance, and bills for the common areas.
Depending on the state, homeowners’ associations will hold an election every few years. Any property owners can run for office provided they satisfy eligibility requirements.
What Does an Hoa Cover?
Every planned development has its own unique set of covenants, conditions, and restrictions (CC&Rs). Before buying property in the area, you need to ask for a current copy of the HOAs governing document. The document will give you comprehensive information about what you can and cannot do in that neighborhood.
Most HOA communities have guidelines and regulations regarding the following:
- Requirements for home maintenance
- Changes made to a home’s architecture
- Restrictions concerning holiday decorations and lawn ornaments
- How many individuals can reside in a home
- Parking rules
- Policies regarding noise complaints
- What kind of pets and how many pets are allowed
- Schedules and rules for trash and recycling
- Whether or not you can rent out your property for a short stay
It is clear that HOAs have numerous rules and regulations. So, what happens when you violate one of these rules? Well, the HOA could slap you with fines, warnings and even place a lien on your house.
What Do Hoa Fees Cover?
When you buy property in a community with a homeowner’s association, you will be required to pay HOA fees in order to enjoy the privileges being offered. You will also be expected to adhere to the association’s CC&R.
So, what does the homeowner association fee cover?
Maintenance of Common Areas
The homeowners’ association is responsible for the maintenance and upkeep of common areas in the community. This includes outside walls, entrances, lawns, sidewalks, walkways, parking lots, and driveways. The HOA can repair damages and improve the facilities for aesthetics or safety reasons.
Amenities and Service
Some HOAs provide access to amenities such as a gym, pool, fitness center, or clubhouse for all the residents of the community. You are also likely to enjoy security services, with ample lighting and security cameras installed, as well as a security guard on-site 24/7. High-end communities usually have exclusive features like valet services, concierge, a relaxing rooftop lounge, and luxury fitness centers staffed with trainers. As you could imagine, HOA fees in such communities can be very high, often running into several thousand dollars per month.
If a community experiences pest problems on a regular basis, the HOA fees could cover the cost of pest control and prevention services. However, detached homes usually don’t have this inclusion since homeowners are expected to handle their own pest problems.
Related: Who Is Responsible for Pest Control in a Rental Property?
This applies to insurance for damages to the outside of the building or common areas. However, you will still need individual insurance to cover all the areas you are responsible for, such as the inside of your home.
A percentage of the fees you pay will be put aside into the homeowners’ association reserve. This is basically a savings account that the HOA can fall back on in case of irregular or unexpected expenses. However, if the HOA doesn’t have enough money saved, residents might have to pay a ‘special assessment’ to cover the costs.
Before buying property in an HOA community, be sure to check the documents to see if there is any restriction on how much the association can demand as a special assessment and how often.
What Are the Average Homeowners’ Association Fees?
Depending on the community, the HOA fee could vary from a couple of hundred dollars per month to several thousand. According to Trulia, the average HOA fee is about $200 to $300 per month. However, HOA fees are not static. Just like taxes, they could rise every few years depending on inflation or the needs of the organization.
Now to the question of the day – Are HOA fees worth it?
Is HOA worth it? Are HOA Fees Worth It?
To answer this question, let us look at the advantages and downsides of HOAs.
Pros of homeowners’ associations
- You don’t have to worry about maintenance: Owning property in an HOA community means that you won’t have to worry about mowing your lawn, pruning a tree, or doing other maintenance tasks. This could save you lots of time and money.
- Access to amenities: As mentioned earlier, HOA communities come with amenities such as tennis courts, restaurants, pools, parks, and other shared features. This could make it easier for property owners to find and retain tenants.
- Peaceful living: Your tenants are not likely to be disturbed by smelly trash, loud parties, or barking dogs. The HOA rules ensure orderliness in the neighborhood. Any neighborhood disputes can be addressed to the HOA directly.
- Utilities are included in the monthly fee: A HOA community makes paying monthly bills easy. In many cases, the HOA fees cover utilities such as gas, sewer, water, recycling, and trash.
Cons of homeowners’ associations
- The HOA fees could be high: In some communities, the HOA fees can be insanely high and eat into your profits. Before you buy property in an HOA community, find out if you can actually afford the monthly fees.
- Inability to improve your home: In many cases, HOAs don’t allow homeowners to remodel or paint the outside of their homes. If you would want to improve your home’s exterior to attract tenants, then an HOA community is probably not ideal for you.
- Poor management: Paying HOA fees is not a guarantee that you will enjoy the benefits promised. A poorly managed HOA could fail to enforce parking rules, fail to fix broken stairs or walkways, allow access to amenities and fail to offer regular lawn care. This could result in losing tenants and experiencing high vacancy rates.
Related: Homeowner’s Association: 10 Real-Life Horror Stories
Are HOA fees worth it? As you have read, paying an HOA monthly fee comes with its own shares of pros and cons. Be sure to do your research before buying a home in such a community. Seek advice from your realtor, as well as the residents of the community. Lastly, use Mashvisor tools, such as an Airbnb calculator, to see how HOA fees and other expenses will affect your bottom line.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.