.jpg)
Many new property investors assume that generating a passive income with rental properties is simple. A rental valuation can tell you a lot about the money you can earn renting out a property, but that isn't all there is to it.
Recently, a story broke in Atlanta about a homeowner's battle with her HOA leading to the foreclosure of her home.
As HOAs rise in popularity, property investors need to consider what an HOA might mean for their investment. What is an HOA lien and how can you avoid one in Georgia?
Read on to learn more about the impact HOA liens can have and how to factor them into your rental valuation.
What Does a Rental Valuation Reveal?
Whether you're considering renting out your current home or buying a home as an investment property, it's important to get a rental valuation. Rental valuations are conducted by a third party and take into account the:
- Condition of the property
- Location of the property
- Local rental market
This information is then used to give you a current estimate of the monthly rent you could charge that would attract renters in the area. You can then compare this number to any expenses you'll incur, including maintenance and any remaining mortgage payments you need to make. If your property is under the jurisdiction of an HOA, you also need to consider HOA dues in this process.
What Is an HOA Lien?
In order to operate, homeowner's associations charge dues, often on a monthly basis. If a resident fails to pay their dues, the HOA can take out a lien on the resident's home.
Fortunately for Atlanta property owners, Georgia is not a super lien state. This means that HOA liens do not take precedence over other liens the resident is still paying off and won't lead as quickly to a foreclosure. However, it can lead to garnished wages and bank accounts and, in the long run, foreclosure.
How Can You Avoid an HOA Lien on Your Rental?
Failing to pay HOA dues can lead to serious consequences. It is in your best interest to cover those dues yourself, rather than asking your tenants to cover them.
One option is to bundle the cost of HOA dues with the cost of rent. Because mortgages do not cover HOA dues, you will need to consider both your mortgage payment and HOA dues when calculating your rental income. If this combined cost goes well above your rental valuation, you may want to consider alternatives like selling.
Partner With PMI to Protect Your Investment
The good news is that a Georgia HOA lien is not a super lien. The bad news is that it can still lead to serious consequences. Never leave a tenant in charge of paying HOA dues, because failure to pay could lead to the loss of your property.
Need help managing your rental finances? Contact PMI to learn how we can help.
