Residential renting is a nice way to bring in extra income to your year-end bottom line, be it a single-family home, apartment building, or even your condo. However, there might be some unforeseen restrictions to consider brought on by your city, county or state.

Homeowners Associations (HOAs) usually have their own rule and regulations regarding leasing out your unit. So before you look into the best way to market your space for rental, here are some tips to keep in mind.

Make Sure your HOA Allows Rentals

Most HOAs have involved Rules and Regulations that can dictate how and when you can lease out your unit, or if it’s even allowed. Each unit owner must abide by these statutes, which are provided during the closing of your contract. While extensive, these usually ensure that your building maintains its standard of living and to ensure property values are kept as high as possible.

Read these rules very carefully, as some HOAs do not even allow owners to lease. If you are looking into single-unit investment properties, make sure to inquire prior to putting an offer. Review documents, be candid with your agent about your rental intentions, and note other policies that might come in conflict with your plan to lease out the unit.

Knowing the Rules and Regulations

Even if your HOA allows for individually owned units to be leased, there might be restrictions to how and when it can happen. A few of these stipulations are the number of tenants allowed to occupy the unit; pet permissions; or a mandatory waiting period (i.e the owner must own and occupy the unit for a specified amount of time prior to renting).

Other factors related to the building itself might be rules about the percentage of units that can be leased. This is another point to inquire about prior to the purchase of your condo, as it might indicate a long and unknown wait time before you can begin your real estate investment.

The Tenant Approval Process

Once you have determined you are able to lease your unit, there is the search for the perfect tenant. Whether you or a management company will be fielding incoming applicants, there can be strict requirements for future tenants. Outside of the normal course of applicant screening (income documentation, background checks, employment verification, etc.), the HOA may have its own qualifications that must be adhered to.

While some HOAs may be more lenient about tenant approval, others can have stricter policies. HOA approval can range from simply filling out paperwork to more in-depth measures like screening the application themselves and even performing an interview with the Board of Directors.

Regardless, the Association will always need a notice that someone other than the owner is residing in the unit. Reference your rules and regulations to make sure you are abiding by the process and to avoid any fees that might incur. If you need clarification, reach out directly to your association.

Setting Your Rental Rates

It is extremely important to factor in all expenses when deciding on a market rent. Without carefully planning the type of expenses you can incur as a condo owner, you can easily see your return on investment amount to very little yield.
Some points to consider when you are establishing your rent are property insurance, maintenance and upkeep, mortgage payments and interest, property taxes, and unforeseen emergencies. With condos especially, it is very important to not forget the HOA fees. These can be a considerable amount to offsetting your rent-to-profit ratio.

HOA fees usually include building and amenity maintenance, disposal services, landscaping and more. Prior to purchasing your condo, it is paramount to understand the cost and disbursement of these funds.

Tenants Abiding the Rules

Aside from specifying how and when you can lease out your unit, it is important to know the nuances of your HOA’s regulations as a landlord. These same rules will also apply to your tenants, so making sure you are transparent about these stipulations is your responsibility as a lessor.

Because your leasee’s behaviour reflects on your own, it is imperative you stress the importance of these rules. Make sure to note in your lease’s covenants that your tenant has received and reviewed a copy of the regulations and that there is a place for them to sign and verify. Any violation of these can result in a fee and a possible negative result on your own hold in the building..

Making Sure Everyone Is Insured

You should ALWAYS have homeowners insurance on your unit- rented or not. However, landlords should have increased coverage that has particular policies on emergency maintenance, tenant damage, and loss of rental income.
In turn, you should also require tenants to provide renter’s insurance. There are varying degrees of coverage, but even the basic policies should cover burglary, replacement of personal property, and liability of damage done to the building or other units. In order to ensure that this is a mandatory stipulation of renting out your unit, include a clause in your lease that it is required and record their information before handing over keys to the unit.

In Conclusion

Renting out your condo is a wonderful way to collect a return on your real estate investment as long as you know the ins-and-outs. One of the best ways to ensure you have a good handle on the leasing process is to hire a property management company. It will allow you, as the owner, to collect the profits while your management company does the heavy lifting with the HOA and tenants. You may consider hiring the management company of the association or outsourcing to another firm.

Regardless if you self manage or hire out, you must adhere to the rules and regulations of your HOA. Make sure to fully comprehend and be aware of these stipulations and any changes that may happen during the course of your condo ownership. The best course of action is to have a reliable real estate agent on your side, ready to consult and aid you in your journey to purchase and rent your condo!