When purchasing a home, one of the considerations that are front of your mind should be the neighbourhood. Is the school district good (even if you don’t have school-aged children, it’s a big issue for resale value or investing in a rental property), are the neighboring homes in good shape, does the neighbourhood offer amenities like a pool, or a playground?
When you find a home that has all of the above, you may also find yourself paying dues to the homeowners’ association or strata organization. This might be fine for your personal property, but what if you are buying the house or condo as an investment?
What is a Homeowners’ Association or Strata Corporation?
A homeowners’ association is the governing body for one development consisting of homes and communal land. The association is usually made up of volunteers from the community and their purpose is to maintain a good development in which to live. They do this by setting rules and monitoring them. The rules usually have to do with construction or changes to homes, landscaping, parking, and maintenance of communal properties like pools, beaches, or playgrounds.
In Canada, HOAs are less common than they are in the US, but they still exist. Stratas are formed by the developer before the units (whether condos, townhouses, or houses) are sold. The bylaws are written in a document that then is expected to restrict all future owners.
Pets are a very common issue amongst condo owners, and they’re often addressed in the bylaws of the strata corporation or the homeowners’ association. You cannot purchase a property without agreeing to the bylaws, both in the US and Canada. However, owners can join together to rewrite the bylaws or vote to make amendments. In Ontario, an owner is not required to agree to any new bylaw even if the other residents agree to it. This is a protection offered in The Condominium Act 1998.
Can Strata Corporations or Homeowners’ Associations Affect Investors?
Investors have one goal when purchasing a property: to make a profit. If anything can stand in the way of making a profit, it might not be a good property.
A townhouse in the best part of town might look perfect. Regulations set by the strata corp might seem like a good thing because it will keep tenants in line. But what if it does not? The headache falls on the property owner, not the resident.
In another situation, if you purchase the townhouse in the center of town and look for renters, you will have more restrictions on finding a good tenant with others’ rules hanging over your head. A townhouse next to a dog park seems like a sign of a good neighbourhood, right? It won’t matter much if you can’t rent to a dog owner.
If you would like to make upgrades to your investment, the upgrades may be in the hands of your neighbors. Even if they are approved, the added time tacked on to your construction schedule is money out of your pocket.
So, the answer to the question, in our professional opinion is “No, it is not a good investment if there is a homeowners’ association or strata corporation attached to the property.”
Want to know more about investing in real estate? Send us your questions and we’ll happily answer them for you!
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