San Diego Housing Market News and Analysis

they're using the whole rental unit, why shouldn't they have to pay for repairs or general wear and tear?

I would have to side with the tenants. Just one more reason I hate HOA's

Agree with tenants, it is written in the lease agreement.

If the HOA had raised your monthly fee instead of adding submeters do you think that you would be entitled to raise the rent for that reason alone ? (answer is NO unless it was in the lease)

What part of "water is included in the rent" that you put in to the rental agreement is confusing ?

It sounds like you bought a condo as a rental property, which is the worst type of property anyone can buy as a rental, and an even worse decision for a first time investor.

I can almost guarantee you that your monthly fee will never go down, and it will not stay the same, it will only go up.

Wait until you get a $500 or $1000 assessment for an HOA deficiency that you cannot dispute.
You cannot pass these on to your tenant.

HOA's are ticking time bombs, often run by inexperienced people who think they know what they are doing, but really don't.

If they had not done the submeters, they would have raised your monthly fee.

ALL HOA's need money to maintain the complex and reserves and there are only a small group of people who MUST pay that money.

This is a no brainer.

What you put in the lease is what you have to abide by. If you wrote in the lease that the tenants do not have to pay for water, then they do not have to pay for water.

It is your responsibility. In your next lease you should safeguard yourself better so that if there is another bill that you presumed will be covered by the HOA then you will need to write it in the lease that if the HOA fails to cover that payment, then it will be the tenants responsibility.

It is not fair for you as a landlord to impose fees upon the tenants that you did not agree to in writing and identify in the lease.

tenant. It's in the contract

Clearly the tenant is right. Just wanted to chime in in case you are counting votes.

Some leases roll over to a monthly contract after a certain term.

If you are still in the original lease period, there is likely nothing you can do because it is in the lease.

If it has rolled over to a monthly agreement, though, then you can forge a new lease with new terms.

Tenant. If I were the tenant, I wouldn't pay either.

Again, excellent post, HLS. I wanted to add that a condo owner can be subject to special assessments at the whim of a majority vote of its' assn's board members. For example, the Board might think the roof needs replacement (maybe it does and maybe it only needs repair). They could levy a $3K to $7K assessment for each condo owner ... yes, even if it is a multi-story complex (NOT a "townhome" where each unit has its own roof). They are more likely to do this for a needed expensive repair/replacement if they have many (uncollectable) small claims' judgments for delinquent dues and they don't wish to foreclose their liens.

Unfortunately, most people who buy condos do so because the price "seems" better than a SFR and do not and will never have the money to pay a "potential special assessment" sitting in their bank accounts with 60-90 days notice.

Liens are placed by a condo assn on units in which those special assessments are not paid. Assns do NOT have to get a court judgment to place these liens! They can simply specially-assess the units within the assn and wait a period of time to be paid by the owner before filing a lien for nonpayment. As these liens sit filed for years unpaid and unreleased, their face value accrues 10% per annum interest.

Slightly OT: The ROI is NOT better on lower-priced condo-rental investments vs lower-priced SFR rental investments, nor do they necessarily have less closing costs, IMO. I think the reason they are preferred by some for rental investments (over SFR's) is because most SFR's in the same price range as a nearby condo need a little work on them before placing tenants in them at optimal market rent. Putting $2 to $8K into a recently purchased rental SFR and doing most or all the work yourself in order to place a market-rate tenant in it is a far wiser decision than buying a condo, IMHO. Those who have claimed it takes $25-$40K to fix up a <1600 sf rental house for future tenancy are quoting from what THEY would prefer it have if THEY lived in it. All tenants know what they can rent for their price point and preferred location. What tenants are used to for their rental price range and what owners prefer to live in are often two different animals.

Obviously, if a potential investor only wants to invest in "professional white-collar areas," then he/she will likely not be able to get an ROI on a SFR in those areas. Those owners who have a portfolio of well-acquired rental houses in working class and retired areas are the ones whose net worth will continue to increase in the long haul throughout their working and retirement years, IMHO.

Landlords hate tenants that are nitpickers when it comes to money/repairs/inicidentals... The same could be said for tenants view on landlords.

You really need to ask yourself even when the contract comes due, whether the water bill (if it's small, since it's just a condo) is really worth arguing over IF you're going to have a problem finding the next tenant and have a break in your lease.

If at all, in your next contract, have it water included up to X, and beyond X you're responsible for it Mr/Ms. Tenant if you're planning to keep the tenant.

Consider rentability of your current condo, rental lapse, and current rent rate in your area imho.

It is your contract. You are the one who came up with it. And now you decide to break it for your financial convenience? I don't think there is a judge who would not side with the tenants in this case.

I'm not sure if I should start a new topic on this, but I was kind of intrigued by this post and thought I'd open it up for a bit more discussion if others are open to it. I guess you could say I'm threadjacking, but I feel like the initial topic has already been put to rest that the tenant is right per the lease.

Yes...I just bought a condo as an investment in Encinitas and am confident in my decision, but I'm glad to open it up for others to prove me wrong as a learning lesson for myself and possibly others.

Worst investement? Even if it cash flows and is in a great area where the rents tend to stay high and most people do not ever want to leave?

Monthly fee will never go down...I know that, but would'nt rent go up...increasing my cash flow or increasing my own reserves toward future mainteinance of the property?

Special Assessment...would'nt that be a write off?

Ticking time bombs...Are they all inexperienced? I'll agree that some boards are sub-par, but I believe 4 out of 5 board members in the community I'm thinking of live in the community and have for over 10 years. I would think that qualifies them.

Only a small group to pay the fees...would'nt spreading the cost of a new roof over a number or owners be better than having to pay the entire expense yourself?

I really just like the idea of critically thinking for yourself to make your own decisions as opposed to always following others or making sweeping generalizations that may or may not be true in all cases. Of course there is risk in all investment decisions and you do your best to minimize the risk, but you cannot eliminate it. You do the best with the knowledge you have within your means.

I do think that HLS had a great post and know he's been a pigg much longer than me so I'm not calling anyone out here. I just thought it might be a good housing related discussion. I also like the OP that bought a condo could have made a good investment or could have made a bad one depending on their situation and how the cards fall in the future. Whether or not they did has nothing to do wtih this water bill issue. I think the HOA did what they had to do and it was a much better decision than raising the HOA fees because you can ration your water. I also think that not all HOA's are bad. I think it is a very thankless job and the salary is $0 which does not necessarily attract the best applicants, but I think a lot of them do their best and a lot probably do a good job. I also feel like there is an aspect of a rental in an HOA where there are rules that need to be followed and the landlord has someone else to enforce them for them...which could be a good thing right?

Maybe I'll regret chiming in, but maybe I'll learn something that helps me or others down the road. I think we're all on this blog right now to learn from everyone else right?

I appreciate anyone that might care to share their thoughts and experiences.

sdsurfer - I think that's a great idea for a new thread. I've never owned a condo (as a rental or primary), but have owned two different SFRs that we held as rentals (still have one of them).

My main concern for avoiding condos is control. For the house, we can defer maintenance to soem extent and do remodeling or upgrades as we see fit over time. We are the decision-makers. In a condo, I am afraid of losing control over portions of the finances with regard to the proprty maintenance and repairs.

I guess if there were a situaiton which results in a premium in terms of rent, relative to the costs for the property it might be enough to overcome this (maybe a beach rental or a highly sought after address) but I don't think condos generally command the rent premium overt a similar priced house to make up the difference in HOAs and lack of control.

SDS..
No offense taken in any way. It's an opinion.
Please do not regret chiming in.

My first property that I bought in 1980 was a condo. I lived in it before renting it out for awhile.
I have been a landlord for 30yrs with various types of properties.

I am not saying that one cannot make money from a condo OR that it wont cash flow; at least in the short term.
There are many things that people do that work out fine through nothing more than dumb luck, without realizing the real risks.

In the stock market, there are terms like smart money & dumb money. Dumb money often buys at the top and smart money was in at the bottom, (and sold out at the top)

IMHO condos are a much riskier investment than SFR's, duplex-triplex-4plex. I am a huge believer in being a landlord, but never on a shoestring budget.

A condo assn may have been fine for the past 20yrs but the shoe could drop at any time. Complexes can deteriorate quite rapidly.

PERSONALLY, I'm not going to be an owner of a unit that is subject to 1000 different possible reasons for major litigation, and I'm not going to wonder what the next scare is going to be(i.e. lead paint, asbestos, bad piping, Chinese drywall, etc)

Many don't seem to understand that a condo only gives you ownership rights to the airspace within the walls.
You dont 'own' the walls out, nor the dirt underneath the unit.

It's a personal decision, but I would rather own
SFR's or multi-units out of the area and employ property a manager rather than own a condo just becuase it's local. If a SFR burns down you still own the lot.

I wish you all the best and hope that nothing aggravating comes to you as the result of being a landlord of a condo.
ONE bad owner or tenant can make things really miserable around a condo complex, and may not something that they can be forced to change.

You don't know what tomorrow will bring and you have very little control over a major problem in the complex that you WILL BE partially responsible for.

Lots more could be discussed.

I don't know, my relatives owned a few condo's for the past 30 years. I looked at the HOA/management group, and although they've said they were underfunded almost since the condo was new, they haven't seen a single special assessment. They HOA's fee went up from about $150 back in the beginning to about now being $225 or so..The rent price has almost doubled to about $2300 for a 2/2.

Condo's according to their records are the last to appreciate and the first to fall in price. They generally recommended that I avoid fancy type of condos that would be a big maintenance draw. Like avoiding condos with lots of ammenities. (Complexes with elevators (huge maintanance costs), entertaining centers, lots of gyms,equipment etc)... They also recommended I stay away from condo-converts, since they think a lot of these were done in the hey-day, and almost certain underfunded and with a higher turnover in the community *may* trigger special assessments.

They did mention that given the choices, rental on the SFH would be much better, but that in these day and ages, it's not easily cash-flowable.

Thanks for chiming in! My grandparents have shared similar experiences with regards to a few condo's they bought in the 70's in the Bristol Cove Carlsbad area. Of course it's always "preferable' to buy an SFR for a number of reasons, but I think there are opportunities in condo's as well in certain areas.

Of course there are opportunities.

That's actually part of the point. Condo's were new in the 70's and had far less risks than they do today. 60-80 yr old complexes are going to need help.
Not enough data history on condo's, they became popular in the 70's, not many before then.

I'm a conservative contrarian and remember that real estate AND the stock market were not the sickness that they are today. Many people think they are both guaranteed road to riches.

Far too many people may be way too complacent & optmistic about what they expect from the future based on past results when in reality it's a completely different environment.

I don't think that real estate over the next 20-30 yrs is going to represent anywhere near what it was over the last 20-30yrs.
I will be a very happy camper if I am wrong, but I have zero expectations.

I wasn't popular with some friends in 2005 when I pleaded with them not to buy a house and my views today about certain things are still twisted.

The plural of condo is condos. Where do "condo's" come from?

sdsurfer, unless the roof leaks and is beyond repair, it likely doesn't need replacement. I don't currently own any rentals but have in the past and would prefer to "critically think for myself" whether my propertie(s) actually need new roofs (or not). The same can be said for any other repair/replacements that condo associations specially-assess their owners for.

My posted opinion was based upon the presumption of a property owner's right to control all aspects of his or her property. This is impossible (and also illegal) with the presence of an HOA in the mix.

As a landlord, I wouldn't want to be told what to do (within reason) and/or how to manage my property. I wouldn't want to be fined for the children of my tenant repeatedly chasing a ball through a garden on assn land. I realize a city/county has the right to zone the use of my property and could cite me for high weeds, excessive "storage" of junk visible on my property (both visible from the street) or failure to evict well-known local narcotics dealers. But as a landlord, that's all the "control" I'm willing to concede to someone else. It's hard enough managing one's own rental property without another layer of bureaucracy in the way costing a fortune and untold headaches for a LL.

If my smallish rental SFR needs a roof, I am free to critically think for myself to choose T-lock shingles and have the entire job done for =<$5K in the absence of a HOA. I am free to use cheaper landscaping and fencing than a typical HOA would use. I am free to hire my bro-in-law to roof the place or even do the job myself. I am free to cut a deal with a tenant to maintain the landscaping for a rent credit. The law and local custom does not require or force me (due to what tenants expect in the local SFR rental market) to pay ANY utilities for them, have ANY personal utility accounts open for that property in my name or even have them turned on prior to a tenant's occupancy!

Not so with condo rental properties. As an "investment owner," many of these freedoms are taken away from you and relegated to the condo assn board (who often have wildly diverging levels from one another of expertise, knowledge of property mgmt law and motives for choosing to be board members).

Unlike a detached SFR, when in escrow for the purchase of a condo property with shared walls, a buyer's inspector is often only able to do a limited inspection of the areas he/she can access and issue a limited report as it applies to the inside of an individual dwelling unit. If you, as a buyer, haven't done extensive due diligence on a complex, you can easily get stuck with one which has litigated over construction defects in the past or even distant past, its assn prevailed in suit and those defect(s) are still present today. Just because each owner at one time received lawsuit proceeds to fix the defects in their individual unit/PUD, this in no way means that they used these funds for that purpose or even made any repair(s) at all! There are many, many complexes around the county which have prevailed in construction defect lawsuits even 25-40 yrs ago where only a fraction of the units were actually fixed.

No matter where its locale, the value of a condo owner's property is entirely dependent upon the quality of each owner's current and future tenants, the decisions of their current and future board members, how economically the assn's management company is able to get the required and necessarily regular and periodic maintenance done and keep ALL the dues collected and how well the original developer's construction methods hold up over time. Condo-unit occupancy (both owners and tenants) turns over faster than SFR occupancy but I don't know by how much.

You state you have a rental unit in Encinitas and that "everybody wants to live there." Even if a tenant is living exactly where they want and need to (for work commute purposes), they often move next door or down the street for a better rent deal or upon notice of a rent hike. They do this because they CAN, far more easily than an owner-resident. IMO, it doesn't matter where the rental property is, whether Del Mar or Lomita Village, tenants will always periodically price what they are renting against similar rentals in the same area and adjacent areas. When rents get too high for them in one area, they often move to an adjacent area with lesser rents. In small condos, tenants usually don't have much to move or as many utility accounts so moving isn't such a big deal. As a LL, you must be intimately familiar with your own rental market, i.e. what tenants expect to live in there for the price they're willing to pay for it. Proximity to the beach is only so desirable for most tenants until the rent level is no longer sustainable.

Any monthly fee hikes or special assessments a HOA imposes on an investment owner has nothing to do with the desirability of their unit to prospective tenants OR the monthly rental amount they're willing to pay.

For $300 month (typical HOA dues amt), I could get load up nearly an entire pickup bed at Home Depot or from a craiglist ad with all kinds of things to make my rental SFR more marketable to tenants and do the work myself or have it done cheaply. But I would only have to do this periodically between tenants or when something critical breaks, not every month!

SDS
Just some local perspective. In 1999 I sold my condo/townhouse in Encinitas. I wanted to and should have held onto it but I didnt. At the peak it had increased 125%. Comps on it today still support a 70% increase.

I bought an SFR in what has become perhaps the nicest/most desireable community in the area with the strongest sales and appreciation among SFR's. Including my costs to complete landscaping it incresed 100% at the peak. Comps today support a 55% increase.

Over the last 13 years it consistently appreciated better than an SFR. If I had held onto it I would have close to $1,000/month positive cash flow on it. These are real not imagined numbers.

Ok, I see everyone is sided with the tenants. Thanks for the honest opinion.

NicMM

Thanks BG. I appreciate the insight. I guess we'll see how it goes and stay optimistic.

Thanks Sd! I really appreciate that you provide the local data to back it up.

To put it more precisely, everybody here is siding with logic, common sense, and fairness. What the HOA does and does not do is only between you, the owner, and the HOA. The tenant deals only with you, and all that matters to the tenant-landlord relationship, is spelled out on the lease agreement. You can not unilaterally change the lease terms simply because your HOA changed its rules on you.

Full disclosure: I've been a residential tenant as recently as the Spring of 2011, but I've also been a landlord for about a year now.

I'm kinda feeling like taking the landlords side. We all don't have the whole lease in front of us. Maybe there's some other provision that could affect this one?

Water is included in the rent? Is that the exact language? I'm not yr lawyer nor giving legal advice, but maybe if u put the exact language out here someone could give you a plausible alternative interpretation of the words.

What if the tenants ran the water night and day? Is there no limit?

Not everyone was sided with the tenants. A lawyer is always sided with a potential client who has more money (in this case, the landlord) to pay his service.

OK. I just can't resist making fun of scaredy.

yeah yeah yeah. sorry..

Wow. Never would have thought...

Except you really don't want to unnecessarily piss of a tenant unless you really want him/her out...