For real estate investors, rental properties offer the promise of steady income and long-term growth. But when that property is governed by a homeowners association (HOA), your control over the investment can quickly diminish.
You Don’t Control the Rules—The HOA Does
HOAs are designed to protect community standards, but they often come at a cost for landlords. At the heart of every HOA are strict rules and regulations, covering everything from how you maintain your property to who you can rent it to.
These rules can change at any time, leaving you with limited control over your property. Rental restrictions, tenant approval processes, and even changes to property maintenance guidelines could leave you scrambling to adapt. As an investor, you don’t control the outcome—the HOA board does.
Rising Fees That Chip Away at Your ROI
One of the most significant downsides of HOA rental properties is the monthly or quarterly fee. While these fees may seem like a small price to pay for neighborhood upkeep, they can take a large chunk out of your rental income.
But it doesn’t stop there. HOA fees will almost certainly increase over time—it’s a cold, hard mathematical reality. Developers initially set HOA fees as low as possible to make properties more marketable. After all, lower fees help sell homes quickly.
However, those early budgets rarely account for inflation or rising maintenance costs. Part of the reason is strategic: developers want to keep monthly fees attractive to buyers. For example, if the roof needed replacement in 2015, the cost would have been significantly lower than replacing it in 2025. Yet few boards want to raise fees early on, fearing backlash from homeowners or hurting property values.
As the community ages and deferred maintenance begins piling up, these expenses can no longer be ignored. The result? Sudden large fee hikes or unexpected special assessments—and investors are left footing the bill. These rising costs can quickly erode your profitability and put your entire investment strategy at risk.
And following the collapse of the Champlain Towers, new laws now require stricter maintenance and reserve funding standards, making special assessments even more common—and even larger. But that’s a whole other article for another day.
Micromanagement of Your Rental
HOAs are notorious for micromanaging every aspect of property upkeep. They impose rules about tenant parking, landscaping, noise control, and even the type of curtains you can hang in the windows.
More problematic for investors, some HOAs require approval for tenant selection or have strict guidelines about leasing policies. This creates delays in finding tenants, adds unnecessary bureaucracy, and limits your ability to fill units quickly.
Potential for Fines, Liens, and Legal Action
If your tenants violate any of the HOA’s rules, the fines, liens, or legal actions may fall on you as the property owner. Violations that seem minor—like an unapproved pet or an overflowing garbage can—can quickly escalate into legal battles or hefty fines.
In the worst case, unpaid fines or fees can result in a lien on your property or even foreclosure, forcing you into legal trouble despite being current on your mortgage. This level of power held by an HOA is a risk few investors are prepared for.
Disputes and Drama: An Investor’s Nightmare
Conflicts between landlords and HOA boards are not uncommon. In many cases, disagreements about rule enforcement, property management, or tenant behavior can escalate into tension or even legal disputes.
As an investor, your goal is usually passive income, but an HOA can turn your investment into a constant negotiation, where personal dynamics and politics come into play. It’s not just about managing a property—it’s about managing relationships with board members and residents who can affect your property’s reputation and profitability.
Profitability Takes a Hit
When you factor in HOA fees, fines for violations, restrictions on tenants, and the potential for conflicts with the board, the profitability of your rental property can quickly diminish. Investors often enter HOA communities expecting passive income, only to find themselves bogged down with administrative headaches and financial setbacks.
The result? A high-maintenance investment that doesn’t deliver the returns expected.
Rules Can—and Will—Change
The biggest risk of owning a rental property in an HOA community is the unpredictability of rule changes. HOAs can modify rules and regulations at any time, potentially affecting your investment strategy. Rent caps, increased fees, and new rental restrictions can be implemented without notice.
For investors looking to plan long-term, this can make it difficult to strategize for future growth and profitability. With an HOA in control, the only certainty is change.
Final Word: Know What You’re Signing Up For
HOAs aren’t inherently bad; in fact, they can provide valuable services and community stability. But for rental property investors, the level of oversight and control exerted by an HOA should not be underestimated.
Before purchasing a property in an HOA-governed area, take the time to review the bylaws, fee structures, and rental policies. Understand the potential costs, limitations, and risks before committing to the investment. In the end, you may own the property—but the HOA often controls your investment’s success.
Pro Tips for Investors in HOA Communities
- Know the Rules: Thoroughly read the HOA’s CC&Rs (Covenants, Conditions, and Restrictions) before buying. Pay special attention to rental restrictions and pet policies.
- Factor in HOA Fees: Include HOA fees in your financial calculations, and plan for potential increases in dues or assessments.
- Get to Know the Board: If possible, speak with board members or other investors to gauge how well the HOA is managed and whether there are any major upcoming changes.
- Prepare for Legal Battles: Be aware that HOA violations can lead to legal disputes. Make sure your lease agreements clearly outline tenant responsibilities in relation to HOA rules.
Red Flags to Watch For in HOA Communities
- High HOA Fees: Large or frequent fee increases could eat into your profits.
- Rental Caps: Some HOAs place a limit on the number of properties that can be rented at one time, restricting your ability to rent out units.
- Stringent Tenant Approval: Lengthy or invasive tenant approval processes can cause delays and discourage potential renters.
- Frequent Rule Changes: If the HOA has a history of changing rules often or without notice, it could create long-term instability for your investment.
Author credit
Jacob Mermelstein is the CEO of The Ardent Group, a full-service real estate property and asset management firm serving a diverse portfolio of residential, multifamily, and commercial properties. With over 20 years of industry experience, Jacob specializes in maximizing asset performance, navigating HOA challenges, and helping investors achieve long-term success. He can be reached by email at [email protected].
