H.W. from Fairfield County writes:
Dear Mister Condo,
Our 306-unit condo is now at 48% rentals. The Board relies on a manager to do this type of work. What will happen when we get to 50%?
Mister Condo replies:
H.W., thank you for writing. There are many challenges to managing and living in a community with a high rental rate. For starters, fewer owner occupied units usually means that fewer of the residents have a long-term concern for the well-being and stability of the community. After all, they have no investment in the property and are likely to leave when it suits them by simply not renewing their lease. Many associations with high rental rates also report difficulty in enforcing parking and other rules. Again, some renters (certainly not all) tend not to pay close attention to the rules of the association. The biggest challenge the community may face is qualification for FHA-backed mortgages, which dominate the mortgage world. Many condominiums will lose their eligibility for FHA-backed mortgages if the community becomes more than 50% rental units. FHA changes its rules from time to time so you should really check with a mortgage company that specializes in FHA-backed mortgages for an idea of the impact your association may face if/when the 50% rental threshold is surpassed. I found an excellent article on the subject at Housingwire.com. You can read it here: https://www.housingwire.com/articles/38374-fha-lowers-owner-occupancy-requirements-for-condos. All the best!