Investor Owners in Community Associations: 6 Considerations for Board Members

2024 research conducted by CoreLogic, a leading provider of real estate and property data analytics, found that investors accounted for 29.8% of single-family home purchases in January 2024. This is an all-time high according to their records. While this trend reflects broader shifts in the real estate market, it also has significant implications for condominium, homeowner (HOA), and townhome community associations where investor-owned units can shape everything from governance to daily operations. Not all investor owners are the same and their level of involvement in a community can vary widely.

• Some investors are small-scale landlords who own and manage a few rental properties.
• While others are institutional investors such as corporations or large investment groups that own multiple units or entire buildings.
• Additionally, some investors are short-term rental hosts who primarily use their properties for vacation or temporary stays while others may be long-term rental landlords leasing to tenants.

Regardless of the type, investor ownership presents unique challenges for community associations including concerns over short-term rentals, absentee owners, and tenant disputes. As the number of investor-owned units rises, community associations must take a proactive approach to managing these unique and sometimes challenging dynamics. Here are six key considerations for board members property managers, and community leaders in managing investor owners in association in an effort to maintain stability and financial health. 1. Short-Term Rentals – Many investor-owned units are used for short-term rentals listed on online platforms (ex. Airbnb, VRBO). Issues include transient residents, parking availability, potential security concerns, and access to common areas. Boards should work with the association’s attorney to review governing documents and relevant laws to determine whether short-term rentals are permitted and, if applicable, whether additional regulations or restrictions are needed. 2. Professionally Managed vs. Individual Owners – Some investors hire professional management companies to oversee their units while others directly manage their properties. Professionally managed units may have structured and scheduled upkeep but they can also lead to detached, corporate-style ownership that prioritizes occupancy over community involvement. 3. Off-Site Owners and Tenant Relations – When investors don’t live in the community, they may be less engaged in association affairs. Additionally, their tenants may not be fully aware of association rules and regulations. Investor owners who see their units purely as financial assets may be less inclined to attend meetings or contribute to long-term association planning, placing an even greater burden on boards and community association managers to ensure smooth operations. Developing clear and consistent communication with both landlords and tenants to ensure compliance with community policies can help maintain community standards, minimize disputes, and foster a cohesive living environment that benefits all residents. 4. Voting Power and Board Influence – A high concentration of investor-owned units can shift voting dynamics related to several issues including board member positions, special assessments, and proposed rules. In some cases, this could lead to decisions that prioritize rental profitability over long-term community stability. 5.Deferred Maintenance and Special Assessments – Investor owners may be less willing to approve special assessments or long-term maintenance projects if their primary concern is short-term financial return. This can impact the community’s ability to maintain infrastructure and property values. Boards should ensure they have a strong reserve funding plan in place to avoid reliance on special assessments. Additionally, they can proactively communicate the long-term benefits of maintenance projects to demonstrate how these investments protect and enhance property values for all owners, including investors. 6. Insurance and Liability Concerns – A high percentage of investor-owned units could impact the association’s ability to obtain or renew insurance policies. Some insurers view rental-heavy communities as higher-risk that could lead to increased insurance premiums or coverage restrictions. Boards should work closely with their insurance providers to assess any potential impact and changes within the association. They should also regularly review and update their insurance policies to ensure adequate coverage and consider implementing rental restrictions or guidelines to mitigate perceived risks. Legal Resource Investor ownership in community associations has real, day-to-day impacts on how associations are managed and governed. From handling short-term rental concerns and tenant issues to navigating voting power and financial decisions, board members, property managers, and community leaders should work to proactively address these challenges. These issues can escalate into legal disputes including conflicts with off-site owners, tenant violations, delinquent assessments, and general non-engagement in the community. That’s why it’s essential for community associations to work closely with their legal counsel to create clear, enforceable policies and establish safeguards against potential legal and financial risks. An experienced association attorney can assist by reviewing the association’s governing documents and policies to ensure they align with the evolving needs of your community. They can refine rental restrictions, define maintenance obligations, address assessment delinquencies, and ensure association is complying with local laws involving short term rentals. Do not hesitate to contact our law firm if your association has questions about short-term rentals, rental policies, owner disputes, or other legal concerns. Please call 855-537-0500 or visit www.ksnlaw.com. Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin. Please note the material contained in this article is for educational and informational purposes only and does not constitute legal advice. No attorney-client relationship is established by your review or receipt of the information contained in this article. You should not act on the information discussed in this article without first obtaining legal advice from an attorney duly licensed to practice law in your State. While KSN has made every effort to include up-to-date information in this article, the law can change quickly. 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