Investments come in many shapes and forms. One investment class that I obviously like is residential real estate. But even within that class, there are many different types including detached houses, condominiums, townhomes and even mobile homes.

One thing all of those have in common, especially in the Santa Clarita Valley, is that often they are in homeowners associations (HOAs). So what should you look for when you invest in a property within a HOA?

Maintenance

Do not assume the association takes care of everything. It does not. Find out what your maintenance responsibilities are so you can budget for them.

Inspect the common areas. If the paint is peeling on buildings, trees are overgrown, lawns are shabby, sidewalks are tilting, then roofs and plumbing are probably in a similar condition.

Poor maintenance means you can expect stagnant property values and special assessments as water starts infiltrating common areas through roofs, windows, water lines and drain lines, which may lead to great problems down the road for all homeowners.

Reserves

This is an extension of the maintenance issue. Does the association have sufficient reserves to repair large-ticket items? If not, special assessments might be inevitable.

Reserves in the 70-percent to 100-percent funded range are excellent. Reserves below 50 percent mean probable future special assessments. The lower the reserves, the more imminent the special assessment. If reserves are below 30 percent, look elsewhere for a condo.

Rentals

Inquire about the percentage of rentals in the development. Also, ask if there are any restrictions on the number of rentals within the HOA.

We have had potential customers contact us for our leasing services, only to find out from us that their “investment” property has a cap on the number of rentals. And, to make matters worse, the development is over the cap, so they cannot actually rent their property but must sit on a waiting list.

Pets

If they do not have pet restrictions, is the property a dog patch? If so, barking dogs at all hours of the day and night, plus dog droppings in the common areas, could pose a challenge.

This might not be a limitation on finding a good tenant, but it certainly could be a limitation on keeping one.

Parking

Is there sufficient parking in the development? If not, it will create problems for you and your tenants. Visit the property on a weekend when everyone is home and see what parking is like.

Finances

Ask about delinquencies. A delinquency rate above 15 percent means higher dues to make up the deficiency are probable. Also ask about past dues increases. If they proudly tell you dues have not increased for 10 years, it could mean the HOA has kept its dues down by deferring maintenance for 10 years. It also could mean large increases and special assessments are looming.

Personally, I like investments that are within a well-managed HOA. I do not mind paying a little bit extra each month to assure that painting, roofing, paving, swimming pools and the like are being maintained on my behalf.

But before you lay down your investment dollars, make certain the HOA you are investing in is worth that investment. You are not just buying a condo; you are also buying everything else on that property.

Scott Taylor is the owner of SCV Leasing. For information call 661-294-8500 or email Scott@SCVLeasing.com.