Pros and Cons of Investing in a Property in an HOA
By Michelle Clardie on 12/01/2025.
Reviewed by Josefin Gatsby
Buying a home or investment property in a community with a homeowners association (HOA) can offer structure, consistency, and peace of mind. But it also comes with rules, fees, and additional responsibilities. HOAs can significantly affect your experience as an owner, as well as your potential return on investment (ROI).
So let’s take a closer look at HOAs. What they are, how they work, and the pros and cons that affect real estate investors. Then we’ll look at ways to minimize the hassle of real estate investing, whether your new property is in an HOA or not.
What Is an HOA?
An HOA is an organization that governs a residential community. HOAs are common in planned communities, subdivisions, condominium complexes, and townhome developments.
HOAs establish and enforce rules to keep the neighborhood well-maintained and operating smoothly. They generally aim to create a pleasant environment and preserve property values.
How Do HOAs Work?
Property owners in the community automatically become members of the HOA and pay monthly or annual dues to help cover shared expenses, like maintenance of the common areas. Depending on the development, common areas might just be private roads and sidewalks in the community. Or they could include shared outdoor spaces and interior hallways that connect the units in a condo complex. They could even include amenities like community pools, fitness centers, or clubhouses.
All members vote to elect a board of governors (made up of members of the community). The board oversees finances and makes decisions on behalf of the association. They might collect dues, enforce rules, and manage maintenance themselves, or they might outsource those tasks to a property management company.
HOA Covenants, Conditions, and Restrictions (CC&Rs)
All residents are held to the community’s rules, commonly called CC&Rs, which are designed to keep the neighborhood clean and safe. As a real estate investor, it is critically important to review and understand an HOA’s CC&Rs because they can limit your ability to alter the property as well as your use of the property as a rental unit.
CC&Rs commonly include:
Architectural and exterior standards. In an effort to keep the community looking cohesive, the HOA may dictate which paint colors and materials may be used on the exterior of any unit.
Property use restrictions. There may be limits on home-based businesses, parking (including RVs, boats, or commercial vehicles), noise levels, storage of personal items, or how common areas can be used.
Rental rules. The HOA may set policies on long-term vs. short-term rentals, minimum lease terms (often 6–12 months), rental caps, tenant screening rules, or prohibitions on Airbnb/VRBO-style vacation rentals.
Pet policies. There may be limits on the number of pets, breed restrictions, size limits, leash rules, and cleanup requirements.
Maintenance requirements. The HOA can set expectations for lawn care, exterior cleanliness, trash storage, holiday decor, lighting, and repairs.
Enforcement procedures. The HOA board may determine how violations are handled, which could include levying fines or even correcting problems at the owner’s expense.
The Benefits of Investing in a Property in an HOA
There are multiple advantages to owning and investing in properties within an HOA, including:
Predictable neighborhood standards. HOAs enforce rules that keep homes well-maintained, which helps protect property values and prevent eyesores that could affect rental demand or resale price.
Access to amenities. Pools, gyms, clubhouses, trails, and security features can attract higher-quality tenants and justify higher rents.
Lower maintenance burden (in developments with a lot of shared space). In condo complexes, shared systems and spaces, including roofing, landscaping, exterior paint, and amenities, are maintained by the HOA, so you and your renters have less to manage.
Potentially higher resale value. Well-managed communities tend to appreciate more consistently due to uniform standards and amenities that boost long-term value.
Clear rules and dispute handling. HOAs often mediate disputes between neighbors, reducing your involvement in tenant/neighbor conflicts.
Potential Downsides of Investing in a Property in an HOA
Before you consider investing in a home in an HOA, consider possible disadvantages as well, such as:
Strict rental restrictions. HOAs can legally cap the number of units in the community used as rentals, require minimum lease lengths, or ban short-term rentals entirely. This could limit your rental income potential.
High or unpredictable HOA fees. HOA dues reduce your cash flow. It’s also possible for the board to vote on annual increases or even levy special assessments (for less routine expenses like roof replacements, major repairs, or lawsuits), which can hit with little warning.
Limited control over property use. Investors must follow HOA rules on renovations, paint colors, landscaping, pets, parking, and even tenant behavior. Violations can mean fines. Failure to pay the fines could potentially result in a lien against your property.
HOA financial or management issues. Poor budgeting, insufficient reserves, or mismanagement can lead to deteriorating community conditions or steep assessments, ultimately hurting property value.
How to Minimize the Hassle of Real Estate Investing, With or Without an HOA
If you want to enjoy the many benefits of real estate investing, but don’t have the time, money, experience, market knowledge, or desire to handle a rental on your own, explore alternative real estate investments. In today’s economy, there are multiple ways to invest in real estate without buying property.
Take real estate syndication, for example. With syndication, you pool funds with other investors to finance a specific project, which is professionally managed by a real estate sponsor. The project could be nearly anything, from a single-family house flip to a multi-family BTR development. The sponsor handles every detail for you and your fellow investors. You get the added benefits of low investment minimums and reduced risk while leveraging your sponsor’s expertise, connections, and systems to increase your return potential.
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