How much can you make on the sale of your home? Well that depends. All else being equal, there two things that can nuke your profits: 1) rental invasions; and 2) weak or no HOA. Let’s elaborate.

Each time an investor buys a property on your street, or in your community if you own a townhouse, your property value falls. And with each additional investor purchase, you lose more value. Investors are in the business to make money, so job one is to lowball the offer price, cloaking the low offer behind how convenient it will be to not have to ‘show’ your home and ‘have people walking through your home’. Well sometimes that convenience costs you 40 to 60 grand in real dollars, but you never know it because you’re not a real estate agent and you don’t know that Zillow doesn’t get it right. Also, they will tell you their offer could change after they inspect, and it usually does, downward, even though often zero of those ‘costly repairs’ never get done. You’ve been hoodwinked.

A proliferation of rentals destabilizes the community and creates a transitory situation…like an apartment complex. People come and go, and you might never know who they are and what kind of background they have. When renters move in, they are often coming in from an apartment situation in fact, and their behaviors are often commensurate with that lifestyle. Also, renter rarely treat a rental as well as they would if they had to pay for damage they do to the property.

So, before you buy, find out how many rentals are in that community, PARTICULARLY if you are buying new construction. Some of the production builders make their ‘numbers’ by selling to international LLC’s, and these ‘LLC’s’ are often owned by LLC’s, or multiple LLC’s layers deep, and they buy many homes in each community. So FIND OUT how many units they sell to investors, and whether or not there is a limit. If you buy in a rental community, your property value over time (equity/profit) will suffer.

Now I know the current trend is to ‘rent to own’. This paradigm is set up to benefit the investor, not you. If you buy into this setup, you will likely not be able to save up to buy somewhere else if you want to move, and my guess is, you will want to move. Rental communities are not stable ones. I don’t know, maybe stability doesn’t matter to you, but if your PROFIT does matter, think twice.

If you plan to buy a townhome, ASK HOW MANY rental properties are allowed in the community. If the answer is “we don’t have a limit”, go somewhere else, is my advice. In one townhouse community I know of specifically, investors have lowered property values by about 60K, in part because they succeeded in making a profit for themselves, and in part because the homeowners never knew they were duped.

Now let’s talk HOA. HOAs are there to protect your property value. IF there is NO RENTAL LIMIT provision, then the community will have to vote to install one. If the community votes against it, then they clearly do not understand the impact having too many rentals will have on property values. If your neighbor sells to an investor, they were never a ‘neighbor’. But again, the HOA is there to protect your property value, and to provide services. If your neighbor doesn’t pay for their services, you pay. For them. So while you may ‘hate HOA’s’, they are a benefit. And if you’ve never seen pig pen in a fenced in back yard in subdivision, be careful. That could be your neighbor one day. And if pigs pens are allowed and you are downwind, tell me again how much you hate HOAs. I’ve seen it happen.

Obviously it’s up to you to whom you sell your home. Just know that if an investor approaches you, they plan to make a profit on your home, and most of that profit is coming out of your profit. Hire a realtor or at least have a conversation with one. Unless you have forty grand to toss away.

Brenda Briggs, Premier Advantage Realty