Well, today, we're going to talk about the five things that you need to look for
when you're buying inside of an away or a homeowner's association.
So we get this question a lot and a lot of times people buy into an away
and then later they realize that there's all kinds of financial issues
and or restrictions on the use of your property.
The truth is, the H-2A can be a financial wild card,
but it can also maintain the integrity of your property.
An organized, financially solvent H-2A can help ensure that the common areas
are maintained
and that the esthetics of the community are kept to a certain overall standard.
That can be good if you're a homeowner.
However, on the other side of that, a chaotic H-2A
can be irritating and very expensive.
A regular ritual.
A meeting at Superstition Lakes Condominiums in Mesa turns ugly.
What are you trying to accomplish with this harassment?
It's going to try to destroy the community that you learn.
So here are five of the most important
things that you need to find out before buying inside of a away
or a homeowner's association.
So let's start by what a homeowners association is It's basically
an organization that oversees some kind of a plan community, and it's responsible
for making sure that the common areas are properly maintained.
They also set guidelines for noise esthetics of the property
where people can park and many, many other issues.
So when you're considering buying a property, it's very important
to find out what you're getting into.
So number one is obviously, can your property be used for a rental?
Now, this comes up on regular rentals.
And of course, the hottest topic right now, Airbnb's or short term,
and this could be the most important question that real estate investors
need to ask, even if it is going to be your primary residence
right now, that could change in a few years.
And you may want the option of renting later.
Also, some ways allow long term renters, but do not allow short term.
Please make sure to find this out before you buy.
And also make sure that you check out the webinar with the Neal
and the Airbnb experts, because their recommendation
is that you don't buy any property inside of an HSA
What are the H-o A's rules?
Now, this can widely vary from community community.
So it's very important that you dig in to the both bylaws and C, C, and R's,
which are the covenants, conditions and restrictions inside of these documents.
Everything will be laid out for you, the C, C, and R's.
They lay out the rules for tenants and the penalties for violating the rules.
It can also include things like property maintenance,
dues, pets, parking, architectural restrictions,
and information about dispute resolution as you're digging into the highway.
Be sure to ask your realtor for the H
a minutes and the financial statement for that H away The H away
actually collects dues and pays bills, and so they should have
income and expense statements and financials for you to review.
Be sure to read the minutes because inside of those minutes
can be golden nuggets of information that you can see on things
that they're planning or having problems with before you buy.
So you need to find out exactly what the HRA dues are
and how often they're getting increased.
And be sure to ask what you're getting for in these dues.
And it should be all easily explained in their financial statements.
As we're heading into these times of inflation.
I can assure you that things like common area water,
common area, electric and routine maintenance are going to go up
and therefore the highways are going to be spending more money
and it's going to actually make it into your monthly dues.
Fourth, how large is the reserve fund?
Now, think of this as a capital account full of money for things
that you're going to need to do.
So think of the roofs.
Think of the exterior paint.
Think of things like that.
The highway is responsible for s growing every single month from everybody,
a certain amount of money and putting that into the capital fund or reserve fund
so that when time comes that you need a new roof, they're not doing
what's called a special assessment and coming after you for that money.
This is a critical piece and this is what surprises
most people when they buy into an away.
On one hand, the homeowners do not want any
kind of increases on the other hand, things are going up
and therefore there's no money when you need it to do big projects.
So make sure that they have large cash reserves for any and all repairs
and that they're budgeted and well thought through.
I personally prefer communities with at least 100 homeowners
to help offset the cost of any type of special assessment.
Five.
I found this great cartoon, which I thought was funny.
Need money broke, lost my home, need a way freeze.
Broke no reserve being sued. Please help.
This fifth issue is a big one, guys.
So what this means is, are there any special assessments planned?
So if there's capital money or replacement reserves like they're
talking about here, but it's not enough to cover something like a roof.
So let's say the roof's 100,000 and there's 50,000 in the reserve account.
They are going to do a special assessment to you, to all the people
inside of the community so that they could do the roofs
pay $100,000 and they're going to send you an invoice.
Special assessments occur when major repair is necessary
and there just isn't enough money or funds to cover those repairs.
Obviously there is some negligence on the highway
not having enough money, but at the end the homeowner pays the bill.
The extra expense is definitely going to be passed on to you,
and you do not want to buy into a community that has a reoccurring pattern
of special assessments and even worse, have high capital needs
and there's no money to pay
for those things because that money is definitely coming from the homeowner.
Be sure to check whether or not the highways can even live in your property
for these funds because they're going to move forward with things like the roof.
Even if you don't have the money.
So don't let any of this scare you off and buying in an area with an away.
I've owned many, many properties
in H-2A communities where the H-2A was financially solid
and they did a great job of enhancing the quality of the community.
But that's because I did my due diligence and ask the right questions.
First, do not be afraid to ask questions.
And if the H-2A doesn't want to provide some or all of this
information, you definitely need to keep looking.
Make sure when you're budgeting
and looking for cash flow that you guys know what your H-2A fees are
and you know what the H-2A has on reserve and any potential special assessments,
because those things can wipe out all your cash flow that you make
for an entire year.
So be very, very careful and know what you're buying before you buy it.
Until next time.