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.
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.
Restrictions can range from landscaping, paint colors, window treatments and pets. CC...R's should be read very carefully before purchasing a home to ensure you will enjoy your home the way you intended. Depending on how your Purchase Contract is written, you can usually cancel a home purchase within a specified time after reviewing these documents.
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.
In a normal housing market, rentals have always been considered to be in areas that have a higher crime rate or in an area where property values are low. This is not the case especially in today's economy. There are so many reasons today why property values are declining. Foreclosures and bank-owned homes are now attributed to this cause as well.
Is renting our homes today an option? This is a good question. Many HOA's are trying to amend their CC...R's to prevent rentals in the community. Where does that leave us? Do we have any leverage or authority in the HOA's? Can they make these changes without our approval?
Most states have laws clearly stating that if you reside in a Homeowners Association that has CC...R's, there is a contract between the property owner and the Homeowners Association. When you execute your purchase, the imposed restrictions are binding. Hence, you must follow the rules.
The issue with amending the CC...R's after the purchase may be difficult but it can be done. When purchasing a home in a Homeowners Association, read the documents carefully. Consider the long term effects of the restrictions and how they may apply to your investment strategy.
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.
Restrictions can range from landscaping, paint colors, window treatments and pets. CC...R's should be read very carefully before purchasing a home to ensure you will enjoy your home the way you intended. Depending on how your Purchase Contract is written, you can usually cancel a home purchase within a specified time after reviewing these documents.
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.
In a normal housing market, rentals have always been considered to be in areas that have a higher crime rate or in an area where property values are low. This is not the case especially in today's economy. There are so many reasons today why property values are declining. Foreclosures and bank-owned homes are now attributed to this cause as well.
Is renting our homes today an option? This is a good question. Many HOA's are trying to amend their CC...R's to prevent rentals in the community. Where does that leave us? Do we have any leverage or authority in the HOA's? Can they make these changes without our approval?
Most states have laws clearly stating that if you reside in a Homeowners Association that has CC...R's, there is a contract between the property owner and the Homeowners Association. When you execute your purchase, the imposed restrictions are binding. Hence, you must follow the rules.
The issue with amending the CC...R's after the purchase may be difficult but it can be done. When purchasing a home in a Homeowners Association, read the documents carefully. Consider the long term effects of the restrictions and how they may apply to your investment strategy.
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