HOA Doesn’t Allow Rentals

What do you do when your condo building HOA won't allow rentals?

Read transcript:

Today I’ve got a question from Austin.

“Hi Joe. I like to use my home as an Airbnb while I’m away. The HOA said that they do not allow Airbnb for the following reasons. What would you do? Any opinions, even opposing opinions, are welcome!”

If the HOA bylaws for single-family occupants state that you're not allowed to run a business from your home, unfortunately you're not going to be able to get away with running an Airbnb. We do occasionally run into this problem with our clients, often investors, that buy a condominium in communities with an HOA hoping to make it into a rental. Many condominiums and HOAs restrict rental properties, and a substantial percentage of HOAs have restrictions concerning Airbnbs in particular.

Honestly, I get it. I personally wouldn't want to live next to a short-term rental unit. If the condominium building is mostly made up of folks for whom this is their primary home, they might not want to live next to tenants who might not care for the property or folks who are more transient. Airbnb and short-term rentals present some challenges for the communities they exist in.

As an investor, I counsel my clients on all things property management and this issue comes up often. I’m not entirely opposed to Airbnbs, as Airbnbs stipulate that the unit must be cleaned every time the guest leaves the property. As soon as they're done with their vacation rental, a cleaning crew comes in and makes the property brand-new again. This is a very different dynamic than, say, a tenant that's in a unit consistently for a year. They might have a pet that can do significant damage in the long run, or perhaps they neglect to adequately clean their sink, their stove, their tub, etc. These items can actually get permanently damaged from the lack of care and can be costly to replace. In this respect, Airbnbs solves the cleanliness problem.

My one concern—though thankfully it's never been an issue for us—is that with Airbnbs and short-term rentals, folks who are just staying there for a weekend might not really care about what they do to your property. They may dump bacon grease down your sink and damage the plumbing; they may flush something down the toilet that shouldn't get flushed. Now, in examples like this, a plumber really is not a major expense, but it’s still an inconvenience. If you're making more money running the Airbnb than what you spend on the repair or cleanup, just take that possibility into consideration.

In your situation, I would definitely steer away from a condominium building for your Airbnb if they say no to having a short-term rental. If it’s in the bylaws, I don't really see any way around it. I wish I had better advice for you, but in short, it's not something I would personally try to fight! What scares me about condominium buildings is that the building can change those rules at any time. At the drop of a hat, they can decide “No more short-term rentals!” and if that's your investment strategy, then you now have a real problem on your hands.

There’s also always the possibility of them saying no more rentals period. Another common guideline is that they won't allow you to have more than one tenant in a property over the course of a year. In that case, if you have a tenant that wants to break lease and they do so after two months, then you're going to have a problem with your HOA. We see this happen more often in smaller nicer buildings. The HOA is dealing with nicer units—they tend to all be rentals, but the owners are really on top of it—and when they identify a problem, they'll change the bylaws or write new ones in such a way to solve that problem. As with any HOA, if you're going to exacerbate their problem, then you're probably going to find that they're coming after you—and with a passion!

With all of this in mind, as I said, my recommendation would definitely be to seek a new building for your Airbnb uses that permits short-term rentals. Otherwise, I think you’re just asking for trouble with an HOA.


Joe White

Joe White is a Philadelphia Property Manager and Real Estate Broker. He is the owner of Grow Property Management and has been involved in the management, sales and purchases of Philadelphia area rental investment properties since 2008. He is an author and works as a real estate investment consultant and construction manager.

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