I’m Going To Buy A Condo And Then Rent it Out NOT

I receive several calls each week from both investors as well as potential owner’s alike, and they are very surprised when I tell them you can’t just rent out your condo when you feel like it. As part of the Condominium Covenants and Restrictions (also called CC&R’s), only a certain percentage of the homes may be leased out at any given time. WHAT?

And the same can apply to a townhome community…many of them have rental restrictions as well.

Most condo docs limit the number of homes that can be rented at any given time. This can be from as low as 10% of the homes to as high at 25%. For example, if you live in a community with 398 homes, at 25%, 99 homes in the building may be leased at any given time. We have even seen the rare building that allows NO leasing at all! Why you ask?

These rules are in place for a couple of reasons. First, condominium buildings are intended to be owner-occupied. Each home is individually owned, unlike an apartment building where a company owns all of the homes and controls all aspects of the building. Secondly, may mortgage companies will not loan on a building that has to many rentals in it. They might consider the community “unstable.” This could be because an investor might be inclined to not pay HOA fees, or would be willing to lose the property to a foreclosure or other loss versus a homeowner that will work to make sure they keep their home. Also, some investors (not all of course!) may not pick tenants that wisely and then the HOA and neighbors have to deal with a less than desirable tenant in place.

And while not always the case, some renters may not care for the property as well as an owner-occupied home. Of course, that can go both ways! Investors collect their rent, and may not visit the property for months, or only when there is a change of tenants. They have no idea what condition the condo is in, and that condition could have adverse effects on the surrounding homes.

We recently helped an investor who had been collecting checks for 3 years on a condo, but he did not live in Atlanta. The tenants moved out, and an inspection was not completed by the owner, or a representative. Some $5,000 later, we had the condo ready to rent again. Yes….there was that much damage!

It’s not to say you can NEVER rent. Almost all HOA’s have a rental WAIT list. Yes, a wait list! When we help our buyers purchase a condominium, we advise them to immediately place their name on the waiting list. In the Atlanta condo market, it is not uncommon for it to take THREE TO FIVE YEARS for you to clear that waiting list. You may be thinking, “I bought this place to live in…I don’t want to rent it.” But hey…life happens! You might get a job transfer in the future, or be getting married and need a bigger place. If you have your name on the waiting list for a leasing permit, and you clear it, you could turn this property into an investment, and purchase that other place.

Another situation you may find, is some buildings now have a 6 month waiting period before you can even put your name on the permit list. We help you find out any of this information during your due diligence period when you are buying. There can be options if your name comes up BEFORE you are ready to move. But we’ll keep that advice for when you need it!

Also, when you DO get that permit, this will NOT be an AirBnB or a VRBO! Buildings have a minimum 1 year lease requirement, and some HOA’s have but substantial fines in place if they catch an owner doing short term leasing. We have seen some fines as high as $500 per day! Your condo is NOT a hotel room!

So, if you think you can buy an Atlanta condominium as an investment, and then just rent it out…..NOT! Think twice before you say “I’m Going to Buy a Condo and Rent it Out!” NOT!