Hi Mark, my IRA example does specify traditional. That is tax deferred with few limitations. I addressed my comments to younger people, because they have time to wait out the highs and lows of the stock market, and time is an investor’s best friend. This is the same discussion I had with my kids, and one I wish someone had with me when I was in my 20s. Take care and Happy New Year.
I agree with mannie1950 (imagine that!). Steinfeld’s commentary may be all well and good, but it hardly fits in this Forum and especially on this thread. I give advice occasionally in this space but I try to keep it germane to the topic heading or, at least, to notary issues. Jack should do the same.
I was actually responding to Alice2uworld.
Fair enough. This whole forum gets messy at times.
I don’t mind at all my comments being challenged, corrected, or even called boring. In fact, I welcome it. Take care and Happy New Year.
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One of the hazards of IRAs and other tax differed saving is when it come time to pull distributions decades later those distributions will then be taxed. If the combination of distributions and SS benefits exceed certain thresholds SS benefits will also be taxed. This has been a rather unpleasant surprise to many of my retired clients. Diversification should also include tax planning, setting up a Roth IRA or investing in tax free bonds is another strategy. The Tax code was recently amended to include a Roth 401k, which may be a real game changer as the saver can contribute to both. Employers are just starting to offer this option along side the traditional 401k.
HOAs can however pass bylaws that dictate what percentage of homes can be rentals within the community.
These rules already exist in many communities for many many years.
These rules already deter investors of all types in communities and also deter buyers with the intent to live there as should their circumstances change they may be unable to rent their own home to someone until there request comes up for availability to be used as a rental from a request list.
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Then HOA bylaws and deed restrictions are always subordinate to each State’s property laws. What and how far an HOA can reach is limited. In some states HOAs are little fiefdoms run by Karens and Kens [Ok I’m exaggerating a bit here], in other states the element of strong property rights are baked in. There are tactics such s setting up LLCs and Trust to hold hold ownership that bypasses HOA Bylaws to some extent. In other cases the home can be put up for Section 8 housing, placing it under Federal jurisdiction where a whole different laws apply.
Good morning Mark and Happy New Year.
As far as my research can find these restrictions have been held up everywhere including Texas as long as there is a legitimate reason for them and it is not for the purposes of discrimination.
Lenders dislike high percentage of renters in communities as they can adversely effect property value. 20-25 percent is the general threshold.
Lender underwriters will assess a borrower/ property to be a higher risk should there be a higher amou t of rentals and will require a higher interest rates.
As notaries we see that baked in to our lending packages as investment properties are always defined in the paperwork by occupancy statements and other documents.
Interest rates are always higher for investment properties than on owner occupied homes.
There are also a variety of other concerns to homeowners ( the reason this is being discussed) that exist that are considered legitimate concerns that effect property value and orher financial concerns such as insurance rates which can be effected as renters and property values can be effected as renters are more likely to pay less attention to upkeep of a property, etc.
Perhaps the institutional investor has bought enough homes in this development to control the HOA as these types of bylaws certainly deter larger percentage of home ownerships in a particular development.
Your originalal post indicated a percentage of ownership that was at that threshold.
In that case the original owners could be in a poor position moving forward as you suggested.
Good Morning Evan,
The percentage I mentioned was my estimate regarding the number of home already either available for rent or already under lease. I didn’t realize just how deep this trend had taken root. I spoke with the homeowner’s, as well as few of my tax clients in a different neighborhood, both indicating that the existing homeowners were powerless to stop the influx of corporate owned rentals. One family said they left for work only to return at the end of the day to see the builder’s trailer’s and equipment had been removed. When they contacted the builder, they were told the neighborhood had been sold. Both of these neighborhoods are outside municipal jurisdiction so they can avoid local zoning. In Texas counties don’t have zoning authority.
There’s another development where the builder sold a handful of full size homes in a new development. The builder sold the development to a corporate entity who is in the process of subdividing the empty lots into smaller plots with plans to build a community of tiny homes. I’m not certain what the first buyers think about this, I can only image they’re not having conversations with lawyers and not sleeping well at night. I’m not certain if the Tiny Home is short term trend or a permanent fixture in the market.
Keep in mind lenders have no say in what’s in the HOA Bylaws. Discriminate lending is frowned upon for just about any reason. I did discover the corporate owners are underwritten by Venture Capital allowing the corporate buyers ‘appear’ as though they’re paying cash. The mortgages are being bundled up as a private REIT adding another layer to the nested corporate shells.
You’re right about the principle residence claus being baked into the closing docs. In the aforementioned developments there is no lender on the corporate owned properties. The VC allows them to ‘appear’ as cash buyers. I should have mentioned that the first neighborhood had not been fully developed, there were several empty lots waiting for construction.
You’re spot on about upkeep and maintenance. Now ask where are the private owners going to complain? The HOA who’s controlled by a corporation? In Texas it takes about 10-15 years for a neighborhood to mature to the point where it begins to show it’s age. It’s at this point that the corporate owners plan to divest themselves.
I’ve got clients who’ve bought homes only to later turn them into rentals. While the loan documentation indicated the home was intended for owners to keep it as their principle, do lenders do any post closing research to make certain the home isn’t a rental? The lender could file for breach of contract, I’ve not heard of this happening. As long as the lender is receiving the monthly install, I don’t think they care.
The irony is the closing that I first mentioned was for a mobile home park. I’m getting a couple of these closings per month. Instead of closing on 200 new homes, I’m closing on a single property that will hold 200 homes. Still not busy.
Sorry everyone didn’t mean to stir the pot. My son has 3 financial advisors in his world… He is an actor gets deductions that average folks don’t get such physical & health training, hair styling, PR stuff, etc. TMI for me and way over my head. At times he does voice commercials for leasing and title companies that we all work with. Small world 
HOA can dictate the percentage of rentals to owner occupied units.
It depends entirely on the State’s Property Code, what an HOA can and cannot do.
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