Are Gated Communities Good Investments?
If you see a listing in a gated community, you might be wondering if gated communities are good investments? In my experience, no, they are usually not good investments.
While the homes in gated communities are usually in good condition, there are many drawbacks that come along with them that become more of a hassle than it is worth.
Why Are Gated communities Not Good Investments?
1. Fees, Fees, and more Fees
Gated communities have a lot of perks for residents like resort style pools, golf courses, parks, and gyms. But, these amenities come at a cost. Homeowners usually pay a variety of fees ranging from monthly HOA dues, golf memberships, tennis club fees, and in some areas even a one-time or yearly initiation fee just for living there.
Even if you are planning an exit strategy for your real estate investment right away, there is always the potential to have a delay in selling where these fees create hefty holding costs. If you plan to rent the property, you have to decide how to roll the fees into the lease, another complicated and expensive task.
2. Association Policies
If you find a potential investment in a gated community, pay attention to the association rules and contracts. The governing boards sometimes have strict rules about having tenants in community homes, limiting the ability to have a renter. They can even have deed restrictions where there are certain limitations about what you can do with homes in the association.
When you invest in real estate, you want the ability to access the property easily and can make quick changes. With a gated community, you need association approval for any work you do on the exterior, even a simple coat of paint.
Accessibility can also be a hassle if you are doing a traditional sale of the investment property if you try to hold an open house or do showings. The limited access to the community also prevents drive-by buyers you get in a traditional neighborhood.
Besides the fees mentioned above, homes in gated communities also are priced higher than surrounding neighborhoods. This can make it hard for resale when you decide to exit the investment. And, even if the association allows renters, you might have trouble finding a renter willing to pay a higher rent.
I am sure there are some instances where an investment in a gated community might make sense, but very few. To learn how to fund lucrative real estate investments without using your own money or credit, I invite you to attend one of my live events or check out my free online course, Investor kit.