Most investors focus on interest rates, cap rates, and rent growth. But there is a quieter threat eating into property returns across the country: rising HOA fees.
HOA fees are increasing at their fastest pace in more than a decade. In many communities, the growth rate of HOA dues is outpacing rent growth, inflation, and even property taxes. Investors who are not watching these fee increases closely can see their margins shrink year after year without realizing where the money is going.
The truth is simple. HOA fees are no longer a minor line item. They are becoming a major operating expense that must be evaluated with the same seriousness as insurance, repairs, or management costs.
Why HOA Fees Are Rising So Quickly
Several factors are pushing HOA dues higher.
1. Insurance costs are exploding
Many HOAs are facing dramatic increases in their master insurance policies. In high risk states like Florida, California, and parts of Texas, insurance premiums have doubled or tripled. HOAs pass these costs directly to owners.
2. Deferred maintenance is catching up
If a community has underfunded its reserve accounts, large repair projects eventually come due. Roofs, pavement, pools, elevators, and exterior systems all have fixed lifespans. When reserves come up short, HOA boards raise dues or issue special assessments.
3. Labor and materials cost more than ever
HOAs rely on landscaping crews, maintenance contractors, pool service companies, and vendors for every part of the property. All of those companies are now charging more because their own labor and materials cost more.
4. New regulations and compliance costs
Many states are passing stricter structural and safety requirements, especially after condo building failures. HOAs are required to do more inspections, more reporting, and more repairs, which all add to the budget.
5. Poor financial management
Some HOAs simply fail to plan. They keep fees artificially low to keep owners happy, and then they raise them suddenly when things break. Investors who do not audit the HOA’s financials walk straight into avoidable costs.
How Rising HOA Fees Hurt Investors
Higher HOA fees can quietly erode cash flow in several ways.
Less net income:
Every dollar that goes into HOA dues is a dollar that does not reach your bottom line.
Slower rent growth:
In many markets, rents are flattening, but HOA dues are still rising. That mismatch shrinks margins.
Unexpected assessments:
A $5,000 or $10,000 special assessment can wipe out a full year of profits.
Harder to sell:
Buyers avoid properties with unstable or rapidly rising HOA dues. High fees push down resale value.
This is why analyzing an HOA is almost as important as analyzing the property itself.
What Investors Should Review Before Buying in an HOA
If you invest in condos, townhomes, or single family homes in planned communities, you must analyze the HOA with the same rigor you use on the property.
Here is what I look for.
1. Review the last 3 years of HOA budgets
Look for trends. Are fees rising every year? Are reserves falling? Are insurance costs climbing?
2. Review the reserve study
A healthy community should have a reserve study updated in the last 3 to 5 years. It tells you exactly what major repairs are coming.
3. Check the reserve fund balance
A well managed HOA should have reserves funded above 70 percent. Anything under 50 percent is a red flag.
4. Ask about upcoming capital projects
Roofs, pavement, structural work, pool resurfacing, stairwells, and exteriors are all major expenses. If they are coming due, expect fees to rise.
5. Look at insurance premiums
If the HOA is in a high risk region, insurance may be the biggest unknown. Rising premiums can trigger sudden increases in dues.
6. Interview the property management company
Good management keeps costs predictable. Poor management causes messy budgets and chaotic increases.
When an HOA Can Still Make Sense
Even with rising fees, HOA properties are not automatically bad investments. They work well in certain situations:
• You want hands off ownership
• You are buying in a market with strong rent growth
• The HOA is financially healthy
• The property offers amenities that justify higher rent
• You want a condo for short term or mid term rentals
The key is knowing what you are walking into.
How Investors Can Protect Their Cash Flow
To protect yourself from rising HOA fees, focus on three things.
1. Buy in HOAs with strong reserves and clean financials
Transparency is everything. Choose communities that plan ahead.
2. Underwrite conservatively
Assume HOA dues will rise 3 to 5 percent per year. If they do not, you win. If they do, you are prepared.
3. Avoid properties with upcoming large capital projects
Unless the numbers work even after a potential fee increase, walk away.
The Bottom Line
HOA fees are no longer the quiet little expense they used to be. They are becoming one of the biggest risks to cash flow in 2025 and beyond. Investors who ignore them will be surprised when their margins disappear.
Investors who analyze HOAs correctly will avoid unnecessary risk and find properties that produce predictable income.
