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May 5, 2022

Check Rental Restrictions When Buying a Condo

Make sure you’re aware of rental restrictions on that condo you’re thinking of buying—especially if your future plans involve being able to rent it out and keep the property for investment purposes.

Most condo buyers like to know that they’ll be able to rent out their unit if so desired. Circumstances could change and require you to move, but you’d like to keep that condo for the long term and rent it out for a while.

It’s important to be fully aware of potential rental restrictions in the Covenants, Conditions and Restrictions (CC&Rs)—the main document that homeowners associations (HOAs) use that states how the HOA will be run.

The standard rental restriction for a condo building is that homeowners are not permitted to rent their unit on a short-term basis. This means fewer than 30 days at a shot. However, I’ve seen a variety of other restrictions, with the biggest one being that only a certain percentage of units can be rented at a given time. In that case, an HOA maintains a waiting list for which any other owners need to sign up if they want to rent their unit.

Another restriction I recently came across in a well-established condo complex is one that requires new owners to live in their purchased unit for a certain number of years before they can rent it out. (Some new condo developments also carry that restriction.)

HOAs generally have these sorts of restrictions in place to benefit homeowners and their property values. For example, a condo building with a high percentage of rentals limits the type of loan incoming buyers can get. This cuts down the buyer pool, and limits who can purchase a unit.

Make sure you carefully review the CC&R use restrictions before you commit to your condo purchase. Relying on a future ability to rent out your unit and suddenly discovering after escrow closes that you might have to be on a years-long waiting list to do so is not the surprise you need.

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