Possible Long Term Effects On Real Estate Investments
Thinking about purchasing a home as a rental? Whether you are an investor or second home buyer this might not be your initial intent but could definitely be a consideration in the future. As a second home buyer you may consider renting your home during the off season. Could you imagine a law informing you that you are restricted from renting your home? It occurs more frequently than one would believe.
Typically, Arizona homes built after’90 are located within a Homeowners Association with restrictions known as Covenants, Conditions and Restrictions (”CC…R’s). As a homeowner within the Association, you are bound by the restrictions imposed within these documents. Simply put, these documents regulate a homeowner’s use of the property.
These CC…R’s are provided to you prior to purchasing the home and should be read carefully. Usually anything that can be seen from outside can be controlled by the HOA. A bench in the front entry or even window coverings is two good examples. The HOA rules can regulate what plants and trees are allowed in your yard, the paint color of your home and even if you are allowed to lease your home. Some buyers request specifically from their real estate agent, to see only homes in non-HOA communities but these types of developments are far and few between.
During the real estate boom, many builders and HOA’s began improvising and changing their rules to include if your home could be used as a rental. Or the rules stated how long you had to occupy the residence before renting to someone else. At first, renting the property might have been the furthest thing from our minds, but in today’s current market many of us have had no other choice but to consider renting our homes out. When we first closed escrow on our homes we agreed to follow the CC…R’s.
People’s perception of rental properties usually relates to higher crime rates, declining property values and un-kept homes. Although this is the assessment by many, it is not true in most cases. In the current housing crisis the foreclosures and bank-owned properties are portraying a worse image.
With the declining Real Estate market and more homeowners considering renting their homes, we are starting to see Homeowners Associations attempting to amend their CC…R’s to include rental home restrictions. Many people believe that CC…R’s cannot be amended. Amendments happen regarding all sorts of rules and regulations. Can this be true for rental properties too?
When we agreed and signed the purchase agreement on the home, we also agreed to abide by the Homeowners Association Rules and Regulations. Well, that is just fine and dandy, but can the HOA’s now change these rules midstream?
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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