I am learning a lot about being a landlord right now. We bought a townhome in our neighborhood last month as a place to rent to our son. He’s moving into it this weekend and I am trying to quickly figure out what we need to do.
Owning a rental townhouse is a lot different than just owning a house. Even in the same neighborhood.
For example, I was a bit shocked to see how much the monthly home owners association bill for our new rental townhouse is going to run us. It’s $400/month – which is more than 4x what we pay on our much bigger primary home in the same neighborhood.
The HOA covers all the basics – lawn cutting, snow removal, garbage service, and our neighborhood amenities. That’s the same as our house, but it also includes maintaining the townhouse building itself. After all, maintaining/repairing the townhouse roof, siding, and foundation are all part of the association’s responsibility.
We’re going to pay the HOA fee directly ourselves, rather than have our renter (our son) pay for it. It seems like that is what most landlords do and many HOAs require. We better get going fast. We closed on the property last month and haven’t even set up a checkbook for paying bills / collecting rent yet.
We have a lot to learn as landlords, but it will be a fun ‘side hustle’ that benefits our son. Lots to learn!
Image Credit: Pixabay
MrFireStation 
I watch a lot of House Hunters (and the international one) and am always amazed by the HOA costs on condos. “The price on this condo is $200,000, and the HOA costs are $900 per month.” That kind of price just makes my jaw drop.
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Agree! When we were in Florida recently, the HOA fees people were quoting were through the roof. Ours are just 1.3% of the townhome value annually for this one. I guess that’s not too bad.
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There can be a lot of complexities to rental unit management. Since you only tenant is your son, it may not be as big a deal from a profit standpoint, so I won’t go into too many technicalities here. There are a couple of important things to consider with a rental (even with family members). The biggest is liability, which can be mitigated via a healthy umbrella policy since the unit is likely in your personal names. Your son will have visitors, any one of which can be a potential lawsuit (for you) waiting to happen, so make sure your layers of insurance(s) cover all related potential costs: repair damages, liability (as mentioned above), and potential loss of rental income (if you can’t cover the rent without a tenant for an extended period of time). Secondly, be sure to setup a suitable sinking fund(s) for all of the potential non-HOA expenses that are going to come…flooring, plumbing, hvac, appliances, hot water tank, lights/fans, blinds, painting, general repairs, etc.. I’m sure you’ve calculated in taxes (RE taxes as well as income taxes) that will need to be covered as a result of ownership. Rentals can be an amazing wealth builders, but they can just as quickly absorb significant wealth when not purchased with a proper ROI purpose in mind. We own fifty-four rental units, so I’m a big fan of rental property investing. Just be “clear eyed” going in on the actual intent of the expenditure (which may not even be ROI related…and that’s fine, if your purpose is only to provide your son suitable housing). There are many advantages (and disadvantages) to REI…Market appreciation, asset depreciation, cash-flow, diversification (asset and geographic), tax efficiencies, forced asset appreciation, market inefficiencies…so many opportunities that can seem overwhelming initially to grasp. I’m happy for you to bounce questions my way anytime (as a payback for all the fun free reading you’ve provided over the past few years)! 😉😆 PM me anytime.
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Thanks, Thom – Liability wasn’t anything I thought about with respect to this purchase, but we do already carry a big ($5M) umbrella policy. We just paid the annual bill yesterday! As for all of the other potential costs, I see quite a few we’ll need to address. The good news is that I can work through them with my son. Maybe this townhouse is the ultimate father/ son project. 🙂
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Hi Chief,
Here is an interesting article on Margaritaville.
https://www.newyorker.com/magazine/2022/03/28/retirement-the-margaritaville-way
The only comment I have to make is I would rather spend the 1.4% on a HOA fee that problems amenities I use and good company than the People’s Republic of California taxes where we get bad roads and homeless people who in the words of my son look like they are living in Mad Max Conditions.
And no, I don’t normally read the New Yorker.
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Great quote: “It’s like being in college, but with money and without having to study. You have a great dorm room, you never have to go to class, and there’s always a party.” The one we stayed at in Orlando is more of a resort than a neighborhood, like Daytona. I’d like to check that one out though. The one thing I would say is that it is less about Jimmy & his Parrotheads than the article makes it out to be. I think people just like it as a relaxed, happy-go-lucky, island lifestyle.
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Were the people friendly as described, or was this just marketing disguised as an article? The times I have been to Florida, the locals seemed friendlier than LA. I also don’t have to use the ‘fake and merge’ (a move I learned traveling in Boston) and can use my turn signal to change lanes.
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People were very friendly and relaxed. We chatted with quite a few people by the pool, restaurants, shopping district, or just walking our pupper around the neighborhood. We had complete strangers invite us into their cottages and even join their backyard parties. We’ve built a couple homes and I’ve always noticed that when a neighborhood is new, people want to socialize a lot and everyone has the shared experience of building they can discuss.
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Interesting comment about people moving into a new neighborhood want to socialize more than those who come later. That is exactly what I have seen.
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I’m not sure why. I think that the ‘original’ neighbors are maybe a bit less welcoming to folks that come later. Not sure why that is.
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My neighborhood was originally settled by aerospace engineers who built their own homes and hippy musician types when I first moved in. There was a lot of tool swapping back and forth, as well as lending of expertise. I still loan tools back and forth with three of the original neighbors. Another neighbor drove a bulldozer up from a nearby ranch (featured in Gay Talese’s “Thy Neighbor’s Wife”) and dozed my driveway in.
Most of the aerospace engineers left in the early 90’s after the cold war ended and the defense industry downsized and much of what was left moved out of LA.
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