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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.

In Arizona for example, most communities built after’90 are in master planned communities and have Homeowners Associations in place. Also called HOA’s, these associations have rules and restrictions known as Covenants, Conditions … Restrictions (CC…R’s). These rules are specific as to how the homeowner may alter or use the land and 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.

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.

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 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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