• Managing Rental Properties

Understanding HOA Fees

October 31, 2025 10 min read

What Landlords Need to Know About HOA Fees

Navigating the complexities of Homeowners Association (HOA) fees is crucial for landlords aiming to streamline their property management efforts. These fees don't just cover community upkeep but play a significant role in shaping your financial strategy and operational efficiency. By understanding what HOA fees entail, landlords can make informed decisions that contribute to profitability and tenant satisfaction. Leveraging tools like Ledgre can further enhance financial management, allowing property owners to focus on growth and efficiency.

What is a Homeowners Association (HOA)? HOA Meaning

An HOA is an organization created to manage and maintain a residential community, such as a subdivision, condominium complex, or planned development. When you buy a property within an HOA, you automatically become a member, and with that membership comes both privileges and responsibilities.

An HOA is generally governed by a board of directors, made up of volunteer homeowners or elected representatives. This board enforces community rules (known as Covenants, Conditions, and Restrictions, or CC&Rs), manages budgets, collects dues, and hires service providers for maintenance and repairs. It effectively manages the common areas and ensures the neighborhood's appeal and safety.

In short, an HOA acts as both a governing body and a shared investment for all parties involved.

What HOA Fees Are and Why They Matter to Landlords

If you own or plan to rent out property in a homeowners association (HOA), understanding HOA fees is unavoidable when trying to maintain profitability and avoiding legal headaches.

First things first: HOA fees are mandatory if you are renting out a property that exists in an HOA. When you purchase a property within an HOA community, you automatically agree to pay all associated dues. These recurring fees are typically billed monthly, quarterly, or annually, and failure to pay can lead to late fees, interest, legal action, or even foreclosure.

HOAs often carry liability insurance to protect board members. Depending on the community’s size and needs, the board may also hire a management company to handle daily operations like collecting fees, coordinating maintenance, paying expenses, and preparing financial reports.

For landlords, HOA fees represent more than just another expense because they actually shape your operating costs, influence your rent pricing, and affect how smoothly your rental business runs.

What HOA Fees Cover

What is an HOA fee, and what do HOA fees cover? These fees fund the upkeep and management of shared spaces, ensuring the neighborhood remains attractive, safe, and well-maintained. While each HOA is unique, most allocate fees towards three categories: maintenance and operations, administrative and insurance costs, and reserve fund contributions.

Maintenance & Operations

The largest portion of HOA fees typically goes toward day-to-day upkeep of common areas and shared amenities. This might include:

• ​Landscaping and lawn care to maintain curb appeal
• Snow and ice removal during the winter months
• Trash and recycling collection for the entire community
• Pool, clubhouse, and gym maintenance
• Pest control and exterior cleaning services
• Repairs to shared infrastructure, such as sidewalks, fences, roofs, and parking areas

For landlords, these services are truly a desirable advantage. They keep your property and the surrounding community looking pristine without requiring you to handle or schedule external maintenance yourself. That means fewer calls from tenants about exterior issues and higher satisfaction among renters, both of which can reduce turnover rates.

Administrative and Insurance Costs

HOAs also use part of the collected fees to cover administrative and management costs. These funds pay for:

• Property management staff or third-party companies who handle the HOA’s daily operations
• Legal and accounting services, including audits, compliance filings, and legal disputes
• Community utilities, such as lighting, water for landscaping, and shared building electricity
• Insurance policies that protect the HOA’s assets, such as general liability or property insurance for common spaces

These administrative costs reduce personal liability for landlords. If an accident happens in a shared area, such as a tenant who slips on a community sidewalk, the HOA’s insurance typically covers it, not the individual property owner.

Reserve Fund Contributions

Finally, a portion of every HOA fee goes toward a reserve fund, which acts as a savings account for future major repairs and capital improvements. These funds help cover large-scale expenses such as:

• Roof replacements for shared buildings
• Repaving of roads and parking lots
• Elevator repairs or replacements
• Major structural work on shared facilities

A well-funded reserve is a sign of a financially healthy HOA. Without one, associations often issue special assessments that are unexpected, one-time charges to cover unplanned repairs or shortfalls in the budget. For property owners, these assessments can quickly eat into profit margins or disrupt cash flow.

When evaluating or purchasing an HOA property, it’s smart to review the association’s reserve study and budget to see how well-prepared it is for future costs.

How Fees Are Determined

An HOA board, typically consisting of property owners, sets the community’s budget based on projected annual costs. This includes ongoing maintenance, insurance, management, and reserve funding.

Fees may vary depending on property size, location, amenities, or shared utility costs. Before investing in an HOA property, landlords should review:

• The HOA’s annual budget
• Reserve studies to ensure the existence of long-term funding
• Meeting minutes to see if there’s internal conflict or financial instability

HOA fees are a direct reflection of how well the community is managed. A responsible board with transparent financial planning is a good sign, and unexplained fee hikes or missing reserves are red flags.

Typical Fee Ranges

HOA fees vary widely depending on the property type and amenities offered. According to the U.S. Census, last year, roughly 5.6 million homes—or 26% of homes in an HOA—paid less than $50 a month. On the other hand, about 3 million homes paid more than $500 a month.

When we look at specific states, New York had a median monthly fee of $739, reflecting the premium costs associated with its urban areas and high-end amenities. Meanwhile, states like Alabama and Arizona had significantly lower averages, with fees at $52 and $98 per month, respectively. These lower fees are often indicative of communities with fewer shared facilities or less expensive property management services.

Factors influencing HOA fees may include:

• Location: Urban areas or regions with a high cost of living, such as New York, often have higher HOA fees compared to rural or less populated areas.
• Amenities: Communities offering luxurious amenities like pools, fitness centers, and golf courses usually charge higher fees to cover the maintenance of these facilities.
• Property type: Condominiums and high-rise dwellings often incur higher fees due to shared infrastructure and services, whereas single-family home communities might have lower costs.
• Reserve funds: Associations with a well-maintained reserve fund are less likely to levy special assessments for unexpected repairs, impacting fee stability.

Understanding these fee dynamics is crucial for landlords and property investors to effectively plan their finances and anticipate potential changes in operating costs.

Managing HOA Fees in Rental Agreements

When renting out a property within an HOA, landlords must decide who is responsible for paying the fees—themselves or the tenant. There are three common approaches:

1. Include HOA Fees in Rent

The simplest option is to factor the HOA dues into your monthly rent. This makes rent predictable for tenants and ensures payments stay current with the association. However, as the homeowner, you are legally responsible for ensuring the fees are paid. If the tenant fails to do so, the responsibility falls back onto you.

2. Charge HOA Fees Separately

Alternatively, you can require tenants to reimburse you. Include a clear clause in your lease agreement, such as:

“Tenant agrees to reimburse Landlord for monthly HOA dues in the amount of $___, payable with monthly rent.”

Make sure your lease specifies that you remain the party responsible for paying the HOA directly and always review your HOA’s rules on rentals. Some associations restrict leasing, limit the number of rental units, or require tenant registration. Failing to comply could result in fines or loss of rental privileges.

3. Deducting HOA fees under Schedule E

As a landlord, HOA fees can be an essential part of your rental property's operating expenses. You have the advantage of claiming these fees under Schedule E on your tax return, effectively reducing your taxable income dollar for dollar.

To streamline this process, it's wise to diligently record your HOA fee payments each month using expense management software like Ledgre. This makes preparing your Schedule E a seamless task when tax season arrives. However, remember that HOA fees for your personal residence (primary home) are not tax-deductible.

Buying a Property Within an HOA

As stated before, due diligence is important when buying a property. Request these documents and details from the HOA or the seller:

• ​Current fee schedule and history of rate increases
• Reserve fund balance and most recent reserve study
• Rental restrictions or caps
• Pending or recent special assessments
• Rules and bylaws (especially around maintenance and renovations)

Properties within strong, financially stable HOAs tend to retain value and attract quality tenants. But mismanaged HOAs can turn into an expensive, time-consuming headache.

Conclusion

Navigating HOA fees is essential for landlords to maintain profitability and minimize potential headaches. Understanding what these fees cover, how they are determined, and how they can be managed within rental agreements is key to successful property management. By carefully reviewing HOA budgets, reserve funds, and management practices, landlords can make informed decisions that align with their financial goals. This also helps ensure compliance with state laws and regulations, and best practices for property management.

Utilizing platforms like Ledgre can further simplify financial management through automated accounting, ensuring landlords focus on what truly matters—maximizing returns and enhancing tenant satisfaction.

FAQs

What is a Homeowners Association (HOA)?

A Homeowners Association (HOA) is an organization created to manage and maintain a residential community. When you buy a property within an HOA, you automatically become a member. An HOA is governed by a board of directors and enforces community rules, manages budgets, collects dues, and hires service providers.

Why are HOA fees mandatory?

HOA fees are mandatory because they fund the upkeep and management of shared spaces. When you purchase a property within an HOA community, you agree to pay all associated dues, which are typically billed monthly, quarterly, or annually.

What do HOA fees cover?

HOA fees cover maintenance and operations, administrative and insurance costs, and reserve fund contributions. This includes landscaping, trash collection, and insurance policies, among other services.

How does an HOA determine fees?

An HOA board sets the community’s budget based on projected annual costs. Fees vary depending on property size, location, amenities, and shared utility costs.

What are typical HOA fee ranges?

The average HOA fees are highly variable, influenced by location, amenities, and property type. They can range from less than $50 to more than $500 a month.

Can HOA fees be included in rental agreements?

Yes, landlords can either include HOA fees in rent or require tenants to reimburse them. The lease agreement should specify who is responsible for paying HOA fees.

Are HOA fees tax-deductible for landlords?

Yes, landlords can claim HOA fees as part of their rental property's operating expenses under Schedule E. This effectively reduces taxable income.

What should landlords consider when buying a property within an HOA?

Due diligence is key. Landlords should request the current fee schedule, reserve fund balance, rental restrictions, and other pertinent documents about past tenants and neighbors. A well-managed HOA is crucial for maintaining property value.