The Possible Long Term Effects on Real Estate Investments


The immediate or future intent of investors, vacation home residents, and complete-time residents may be the option to lease their homes if and when the need arises. Do you think it is possible to be restricted from renting your home, either seasonally or yearly? You own the character, so why shouldn’t you be able to fully control how the home is occupied? You need to know that renting your home may be banned.

In many States, most communities built after 1990 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 character.

These CC&R’s are provided to you prior to purchasing the home and should be read carefully. Usually anything that can be seen from outside can be controlled by the HOA. Benches in the front entry or already window coverings are two good examples. The HOA rules can control what plants and trees are allowed in your yard, the paint color of your home, and whether you are allowed to lease your home. Some buyers request that their real estate agent show them homes in non-HOA communities only, but these types of developments are far and few between.

Some CC&R’s restrict owners from renting their homes. Some rules state that the character cannot be vacant for any length of time. Most homeowners are aware of the restrictions. During the real estate expansion in 2004-2005 many new home builders would not allow someone to buy a home unless it was their dominant residence. already though many homeowners were aware of their responsibilities, the housing crash left the homeowners no other choice but to break some of these rules. For the most part, it was unintentional.

People’s perception of rental similarities usually relates to higher crime rates, declining character values, and un-kept homes. Although this is the assessment by many, it is not true generally. In the current housing crisis, the foreclosures and bank-owned similarities are portraying a more negative image.

The declining Real Estate market and the unemployment dilemma are leaving many homeowners with no other option than to try and rent their homes. The Homeowners Associations are trying frantically 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 you buy a home, the contract stipulates that all CC&R’s are binding and are made a part of the contract. So basically you are agreeing to the HOA Rules and Regulation. Now the question is can the HOA change these rules after you have already agreed to the original ones? A buy contract cannot be amended unless all parties agree.

The amending of the CC&R’s after the buy may be a challenge but seemingly can be done. Although slightly lengthy, be sure to review the CC&R’s carefully and take into consideration any possible long term consequences. This could affect your future investment strategies.

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