Should Homeowner Groups Stop Investors From Buying Houses to Rent?

[Wolf359]

Sorry it's behind a paywall, but it's been mentioned in many other articles. I guess in certain areas, homeowner associations are stopping investors from buying property.

Of course as an investor and real estate broker I'm against it. I have encountered a few condo complexes where it's 100% owner occupied, the thing I noticed with that type of property was that prices tended to be a little lower because if you ended up buying another place, you had to sell the property instead of just renting it out and holding onto it. Ran into a couple sale units there where the owner had just bought a bigger unit in the building but had to sell their old unit because they couldn't rent it out. In general, I don't think investors are a big threat, usually investors offer less than owner occupied buyers because if it's not a good investment, they will pass whereas owner occupied people will pay more because they're going to live in it and return isn't that big of a consideration. Plus renters have less money than owner occupied properties so home owners are just trying to box out renters. Of the 10+ rentals I have, I don't think more than 2 or 3 could actually afford to buy a place if they really wanted to buy.

Homeowner Groups Seek to Stop Investors From Buying Houses to Rent

Small groups of neighborhood volunteers are blocking companies from buying single-family homes, rewriting homeownership rulebooks to thwart investor purchases of suburban housing.

www.wsj.com

Homeowner Groups Rally Support to Deter Renters

With more investors making real estate purchases, some homeowner associations are trying to prevent investors from buying homes just to rent them out.

www.pymnts.com

 

[wpod]

Why?

 

[WylieCoyote]

There is one rental house on my entire street, and guess which one has all the parking, yard and noise problems. No thanks. I just wish my HOA would crack down.

 

[Zee09]

I have rented many vacation homes via Vrbo, Bookings, etc.
I am very respectful when I do.
I live in the country but if I lived in a development i wouldn't want transient vacation renters either because it ruins the stability of the area. As a neighbor I would have no idea who is living next to me week to week..
This is a bit different but still along those lines.

 

[Jack Watts]

Since I'm comfortable with amount of property I own, I'm all for this. You know, the American way of pulling up the ladder once you get yours!

Honestly, I think it's a complicated question. I've tried to hang my hat on the fact that the demonstrated impact of investment properties on housing un(affordability) seems pretty small; but the truth is that unpacking the actual effects is a bit of a dog's breakfast, and I'm not sure this is an easy thing to measure.

Personally, I think there are ways to allow individual owner's to rent their own property and still banning investment groups or dedicated individual investors (and I'd fit into both groups, since I'm involved in a couple of investment groups and own individual properties).

In short, I think that there is a real effect on housing unaffordability when investors since their teeth into an area, and I do feel bad for anyone of an age where they're trying to buy their first property.

 

[ozric]

There is one rental house on my entire street, and guess which one has all the parking, yard and noise problems. No thanks. I just wish my HOA would crack down.

Yep, in a nearby neighborhood there is one investment company that has been buying houses and renting them. Most of those are the houses with terrible yards, and several noise complaints from what I've heard. There was a band rehearsing late one night in one of them while I was walking the dog. Could hear it several houses down the street. Bet the people next door were thrilled.

 

[samven]

I think its a good idea. If I want to live next to renters I would move into an apt were I could get up and move if things went down hill. I dont want non owners driving my property value down so some Investor can swoop in and buy more fire sale units. When they open up the Million dollar neighborhoods to Sec 8 and Move to Opportunity subsidies then we can talk again, not until.

 

[Tman220]

That would make home owners groups useful! so I doubt they would pursue it.
If it means keeping investors like Blackrock from coming in and buying entire neighborhoods and then renting them out so nobody has a chance to own a home ever, I'm all for it!!

 

[Wolf359]

I think its a good idea. If I want to live next to renters I would move into an apt were I could get up and move if things went down hill. I dont want non owners driving my property value down so some Investor can swoop in and buy more fire sale units. When they open up the Million dollar neighborhoods to Sec 8 and Move to Opportunity subsidies then we can talk again, not until.

As I said, it's sometimes the opposite. It's the investors that come in and fix up broken down properties. That's what I've done with the properties I own and because you can't rent it out, it actually lowers property values as people want to be able to have the option to rent out a property if they need to later in life.

 

[JeffKeryk]

I don't know anything about being a landlord, but can't the landlord set some rules to renters?

 

[Jack Watts]

I don't know anything about being a landlord, but can't the landlord set some rules to renters?

Of course. And truth be told, there is more leverage with renters than there is with homeowners. Of course, there is a pretty strong perception problem; i.e. "the landlord doesn't live here, they don't care"... We have one "nuisance house" on our block, and 2 Airbnb STR's. The nuisance folks are not the STR's...

I hear all sorts of anecdotal horror stories, but personally I've had great luck with tenants, and with long-term (>30 day) vacation rentals.

 

[Wolf359]

I don't know anything about being a landlord, but can't the landlord set some rules to renters?

Yes they can, but if the rules aren't followed, then it's a 30 day notice to cure and then you can begin the eviction process. So then you have to serve the notice, go to court, present evidence, court fees etc. Not that easy if the tenants don't follow. And course they're responsible for the remainder of the lease but good luck trying to collect if they don't pay and if you do this in the winter, then you've got an empty in the winter. Basically it's not as easy as you think. Of course if it's non payment of rent, then it's a much simpler decision to evict. Of course laws vary from state to state.

 

[PandaBear]

It depends on what the HOA wants. If they want higher valuation of their homes so they can sell for more, then this is not a good idea. If they want to keep it cheap (lower property tax in some area) and keeping a nice community, they can do that.

Why can't they just fine the landlord for the tenants' behavior?

Just remember, whatever action has a reaction, don't cry when you want to sell and it is worth less because of that.

 

[ekrampitzjr]

A few renters give the rest a bad name. Every small landlord has a story about tenants not paying rent, causing trouble, getting the cops called on them, fighting eviction, and finally trashing the place when moving out. These are the types people think of when they want to keep rentals out of a property or neighborhood. They don't think about the 90% of renters who are good tenants.

Of course, the flip side is that a few landlords give the rest a bad name too.

 

[Lapham3]

There are plenty of situations of greedy landlords not maintaining properties as well as renters who create damage. My wife and I rented, and in several states, during our early years which as renters is probably typical of young people. The landlords were semi ok, but pretty obviously money was their main thing. Later, we were home owners and also landlords for a few years. We didn't really care for either renting or being landlords, and think ownership, ultimately, more fosters the best of pride and care of a property and invested in your neighborhood and local government, ect.

 

[jeepman3071]

As I said, it's sometimes the opposite. It's the investors that come in and fix up broken down properties. That's what I've done with the properties I own and because you can't rent it out, it actually lowers property values as people want to be able to have the option to rent out a property if they need to later in life.

I don't think this is the type of thing they are against.

There are large investors/companies buying entire neighborhoods and basically turning them into housing complexes.

 

[MrHorspwer]

Those articles aren't about a landlord buying a single (or even a few) properties as investment income.

This is about venture capital-backed corporate ownership: BlackRock, pension funds, and banks. They began buying residential real estate as an investment to offset the hits they were taking on commercial properties that were sitting unused because of the pandemic. They've been gobbling up massive amounts of residential real estate in the past few years.

From an individual homeowner perspective, the properties they turn into rental units are typically run by a management company. Say what you will about certain landlords, at least there's somebody to drive issues to. Property management company? Not so much. You really think they care about complaining neighbors? As long as the tenant is sending in checks, everything is running like it should.

At a larger perspective, residential homeownership is the biggest driver of wealth in the country. The biggest asset on most people balance sheet is their home. Owning a home is typically the first step to building your personal balance sheet and that typically even extends to your children, creating generational wealth. Homes occupied by their owner have a natural incentive to maintain their investment. This is how neighborhoods are made. Structured buying of those properties, with some localities are showing corporate investors buying more than 25% of available housing stock, prevents this wealth and these neighborhoods from developing. It prevents people from buying homes, it keeps them in rentals longer, it stops the creation of wealth, and it damages communities.

 

[RDY4WAR]

I think land/property ownership should be private only. What I mean is no business, firm, or investment group should be able to purchase a home unless that property is to be used for direct business purposes and resides within a zone that permits it. Otherwise, I feel home ownership should be only for private citizens. If that citizen chooses to rent out, then good for them. If that citizen decides to own 50 houses and rent them out, good for them.

Also, I can't stand property management companies. A good friend of mine kicked his to the curb a few years ago as they were hassling his renters over petty stuff that he felt wasn't warranted, essentially causing a high turnaround rate, and then hitting him with >$10,000 bill every turnover for "repairs and maintenance." He called me asking me to look at a property that the management company was saying would be $11,500 before it was ready to rent again. I went by there and saw nothing that constituted such. There were some minor things where kids drew on the walls of one room, some scuffs on the door frame from their dog, and such as that. It wasn't even dirty as the renters cleaned it pretty thoroughly on their way out. I did the repairs in one day to the cost of ~$800 and that included him paying me $300 for the ~6 hours of work.

 

[BMWTurboDzl]

Why?

Rental houses generally are not maintained by the tenant like an owner-occupant and that lack of maintenance hurts resale for existing owner-occupied. Tenants can also cause problems in the neighborhood which are difficult to rectify because they're not the homeowner. Lastly landlords are more likely to let these properties go into disrepair when they themselves have financial problems (tenants which stop paying, bankruptcies, etc.) This has a huge impact on HOA's because they're losing out on monthly maintenance fees. Also, if a landlord isn't paying their HOA dues some states prohibit the HOA itself from doing things like cutting off water to the unit (HOA dues pay for water/sewer) especially when a tenant has occupied the property.

The tenant issue is really only present with starter homes and mid-tier homes where traditionally these homes would be purchased by first-time homebuyers as the current occupants "moved up". It's always been an issue with condos.

 

[BMWTurboDzl]

I think land/property ownership should be private only. What I mean is no business, firm, or investment group should be able to purchase a home unless that property is to be used for direct business purposes and resides within a zone that permits it. Otherwise, I feel home ownership should be only for private citizens. If that citizen chooses to rent out, then good for them. If that citizen decides to own 50 houses and rent them out, good for them.

Also, I can't stand property management companies. A good friend of mine kicked his to the curb a few years ago as they were hassling his renters over petty stuff that he felt wasn't warranted, essentially causing a high turnaround rate, and then hitting him with >$10,000 bill every turnover for "repairs and maintenance." He called me asking me to look at a property that the management company was saying would be $11,500 before it was ready to rent again. I went by there and saw nothing that constituted such. There were some minor things where kids drew on the walls of one room, some scuffs on the door frame from their dog, and such as that. It wasn't even dirty as the renters cleaned it pretty thoroughly on their way out. I did the repairs in one day to the cost of ~$800 and that included him paying me $300 for the ~6 hours of work.

Are you saying you as an individual shouldn't be allowed to place a unit under a LLC (ex,1120S?)