Investor Banned From Offering Property For Rent

Do you realize that you might be prevented from renting your investment home? Prohibiting property owners from leasing their properties is a trend that is growing increasingly popular with some developers and many Homeowners' Associations (HOA).

It's rare that you can buy a new home in a development that does have a HOA. As a homeowner you are bound by the HOA restrictions found in the Covenants, Conditions and Restrictions (CC&Rs).

The CC&Rs regulate your use of your property, restricting everything from the color of the house, window coverings, holiday decorations, sports courts, pets, to landscaping and etc.

One of the most recent restrictions that builders are including in their CC&Rs is a restriction that prohibits the homeowner from leasing their property. Builders have a provision in their sales contracts stating that the home will be a primary or secondary residence and that the purchaser will occupy the home. The owner is strictly prohibited from renting the home.

Why this trend? The idea is to limit the number of rentals in a subdivision because lenders believe that a high number of rentals in a community affects the value of the property and can erode the security of their loans.

Existing HOAs like the idea of no rentals and there seems to be a growing movement to amend their CC&Rs to add the "no leasing" provision.

Investors Beware!

The new homebuyer should be made aware of the no leasing restriction when they buy. But what about the investor who buys a home a few years later? If the investor fails to read and understand the CC&Rs he or she may end up owning a property that they cannot rent.

You can't count on the home seller alerting you to the restriction. They may be the third or fourth owner of the home and not even be aware of the restriction.

Oh sure, you could buy the home, rent it and hope you are not discovered violating the CC&Rs.

However, anyone who has ever dealt with a HOA soon discovers that there are always a few other homeowners with an eagle eye out for the slightest infraction of the CC&Rs. They delight in notifying the HOA management company,,, and the management company is bound to investigate and enforce the rules. For you the investor is no appeal... and there is no recourse.

This is a strong reminder that every investor should have a clause in every purchase contract that says the purchase agreement is contingent upon you receiving, reading and approving a copy of the CC&Rs.

This is a potential ulcer-creating situation that no investor can afford to ignore.

Mark Walters is a third generation real estate investor and he shares his experience from his Web site at: http://www.cashflowinstitute.com

MORE RESOURCES:

ERA Pacesetter closes real estate business - Bizjournals.com

Learn to Profit from Real Estate - Even in Tough Markets - MarketWatch

Tokyo Replaces Shanghai as Best Asian City to Buy Real Estate - Bloomberg

Nokomis Real Estate Ventures LLC files bankruptcy petition - Bizjournals.com

Neuberger Berman Real Estate Securities Income Fund Inc. Announces ... - MarketWatch

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UPDATE 2-Sibir market value halves on real estate buy - Forbes

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/5i-0fd=Rurl=http://www.guardian.co.uk/business/2008/dec/03/sibir-russia-oil-property-tchigirinskicid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNH3p8ejUz7cJebX9v5EssMgRJ9UNAimg src=http://news.google.com/news?imgefp=G0Z9onrcFO0Jimgurl=static.guim.co.uk/sys-images/Business/Pix/pictures/2008/12/03/sh4.jpg width=80 height=48 alt= border=1brfont size=-2guardian.co.uk/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/5-0fd=Rurl=http://www.forbes.com/afxnewslimited/feeds/afx/2008/12/03/afx5771724.htmlcid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNGFZoBHR9TgEUn-t3wYedt-VBctlQUPDATE 2-Sibir market value halves on breal estate/b buy/abrfont size=-1font color=#6f6f6fForbes,nbsp;NYnbsp;-/font nobr13 hours ago/nobr/fontbrfont size=-1Sibir had already outraged minority shareholders when it said in October it would buy some $157 million worth of breal estate/b from its key owner, b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/5-1fd=Rurl=http://www.reuters.com/article/rbssEnergyNews/idUSL364626620081203cid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNEqgLPYeMLjezPTDLIrsVjFzkuirgUPDATE 1-Sibir shares sink 30 pct on breal estate/b buy/a font size=-1 color=#6f6f6fnobrReuters/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/5-2fd=Rurl=http://en.rian.ru/business/20081203/118667008.htmlcid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNHhQuS8jnDgVfRigbGuxOAvwsqmZgSibir Energy to buy $340mln breal estate/b assets from developer - 2/a font size=-1 color=#6f6f6fnobrRIA Novosti/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/5-3fd=Rurl=http://www.bloomberg.com/apps/news%3Fpid%3D20601087%26sid%3DaS_Y7fzEKDYc%26refer%3Dhomecid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNELfuM4KeSafxnEUtkYtcQCUn6ZlASibir Plunges 57% on Russian Billionaire ‘Bailout’ (Update4)/a font size=-1 color=#6f6f6fnobrBloomberg/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/5-4fd=Rurl=http://www.guardian.co.uk/business/2008/dec/03/sibir-russia-oil-property-tchigirinskicid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNH3p8ejUz7cJebX9v5EssMgRJ9UNAnobrguardian.co.uk/nobr/anbsp;- a href=http://news.google.com/news/url?sa=Tct=us/5-5fd=Rurl=http://www.themoscowtimes.com/article/600/42/372867.htmcid=1277136024ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNFQ53JT9zSo3Ol99cf2oZv4H8rzFwnobrThe Moscow Times/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1277136024hl=ennobrall 85 news articles/nobr/a/font/div/font/td/tr/table

Icahn Sues Real Estate Company Over Debt - New York Times

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Whitehall Funds Lose Their Luster - Wall Street Journal

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/7-0fd=Rurl=http://online.wsj.com/article/SB122826598899374457.html%3Fmod%3Dgooglenews_wsjcid=1277094278ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNGnFXtOeDD_ZHMmHZQwx3L3jyfEIwWhitehall Funds Lose Their Luster/abrfont size=-1font color=#6f6f6fWall Street Journalnbsp;-/font nobr20 hours ago/nobr/fontbrfont size=-1By ANTON TROIANOVSKI and LINGLING WEI Goldman Sachs Group Inc.#39;s Whitehall family of breal-estate/b funds is struggling with weak performance and potentially b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/7-1fd=Rurl=http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN0351371720081203cid=1277094278ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNGXfk3jnzL-bdjcnBO6uaysikELFAGoldman Whitehall head warned of firm#39;s exposure/a font size=-1 color=#6f6f6fnobrReuters/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/7-2fd=Rurl=http://www.reuters.com/article/marketsNews/idUSBNG24933320081203cid=1277094278ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNGwNTTJCpO8UJeHtWxkBmz4oBpwxgGoldman Whitehall funds hit by property slump-WSJ/a font size=-1 color=#6f6f6fnobrReuters/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1277094278hl=ennobrall 12 news articles/nobr/a/font/div/font/td/tr/table

Freedom Interactive Launches New Real Estate Vertical - Destin Log and Walton Log

Inland Real Estate Auctions, Inc. Sells Industrial Site in Seneca ... - MarketWatch

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/9-0fd=Rurl=http://www.marketwatch.com/news/story/Inland-Real-Estate-Auctions-Inc/story.aspx%3Fguid%3D%257B11D52A18-4076-4474-9C4A-F7F53F1C183D%257Dcid=1277200823ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNFKqlx2AV9vHxT_HPVgrQErkFaJogInland bReal Estate/b Auctions, Inc. Sells Industrial Site in Seneca b.../b/abrfont size=-1font color=#6f6f6fMarketWatchnbsp;-/font nobr7 hours ago/nobr/fontbrfont size=-1One of the nation#39;s top auctions firms, conducting transactions from coast to coast, Inland bReal Estate/b Auctions, Inc. is a leading provider of accelerated b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/9-1fd=Rurl=http://www.marketwatch.com/news/story/KPMG-Corporate-Finance-LLC-Taps/story.aspx%3Fguid%3D%257B0B78E8A1-8AEC-4007-AF82-59A1AB3B7581%257Dcid=1277200823ei=hzI3Sf-wM4HI9ATw_KHuAQusg=AFQjCNGzyXwYZnRRo0d0jQ62ezX9_3wnVwKPMG Corporate Finance LLC Taps Renowned Auctioneer Frank J b.../b/a font size=-1 color=#6f6f6fnobrMarketWatch/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1277200823hl=ennobrall 11 news articles/nobr/a/font/div/font/td/tr/table

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