Strategize Your Investment Before Investing in Your Strategies

Many investors and vacation homeowners purchase homes with the intention of leasing them either full-time or seasonally. But what if you were told that you were prohibited from using the property as a rental? It happens more often than you’d think.

Many areas throughout the United States, especially in more populated areas have Homeowners Associations. These HOA’s have rules called CC…R’s (Covenants, Conditions … Restrictions). You have an obligation as a homeowner to abide by these rules and regulations. These rules and restrictions mandate how you as the homeowner can use the property.

Surprising enough there are guidelines as to what percentage of grass you are allowed in the landscape, the colors and trim on your house and even your window treatments. Review and thoroughly read the CC…R’s before purchasing a home. You are usually given a certain time frame to review these documents and will have an opportunity to cancel your contract.

Some CC…R’s restrict owners from renting their homes. Some rules state that the property cannot be vacant for any length of time. Most homeowners are aware of the restrictions. During the real estate boom in 2004-2005 many new home builders would not allow someone to buy a home unless it was their primary residence. Even though many homeowners were aware of their responsibilities, the housing crashed left the homeowners no other choice but to break some of these rules. Of course, it was unintentional.

Rental properties have often been associated with higher crime rates, declining values and homes that are not maintained. Although this is a perception by most, it is usually not common in every community with rental homes. But a couple of bad apples ruin the bushel.

The declining Real Estate market and the unemployment statistics are leaving many homeowners with no other option than to try and rent their homes. The Homeowners Associations are frantically trying to find ways to amend their rules to prevent this from happening. Can the HOA’s do this legally? Does the homeowner have any say in the matter?

When you purchase a home the contract stipulates that any CC…R’s are binding and a part of the contract. So in essence you are agreeing to the HOA Rules and Regulation. Now the question is can the HOA change these rules after you have already agreed to the original ones? A purchase contract cannot be amended unless all parties agree.

The amending of the CC…R’s after the purchase may be a challenge but apparently can be done. Although somewhat lengthy, be sure to review the CC…R’s carefully and take into consideration any potential long term consequences. This could affect your future investment strategies.

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