Run a Business? You'll Need to Be Very Careful When Buying a Home in an HOA

One of the biggest expenses small business owners tend to face is rent. It can cost a lot of money to secure office space or a storefront.

If you're selling goods to customers or are providing an in-person service like group fitness classes, renting space for your business may be unavoidable. But certain businesses can easily be run out of a home.

Let's say you're in the business of editing content for different publications. All you really need to do your job is a quiet space, a laptop, and access to the internet. Why bear the cost of renting an office if you have the room to do that sort of work from home?

Similarly, let's say your business is financial planning. If you have a home office, there's no reason you couldn't see clients in your home if it's quiet there during the day and conducive to a professional atmosphere.

But while running a business from home might seem doable in theory, in some cases, you may get tripped up if you buy a home that's part of a homeowners association, or HOA. So you'll need to read the rules very carefully before making an offer on a home in an HOA.

When your HOA gets in the way

There are pros and cons to buying a home in an HOA. The upside is that your HOA might come with certain amenities, like a community pool and clubhouse, that enhance your quality of life. The downside is that you might end up with not just expensive HOA dues, but restrictive rules you have to follow. Those could negatively affect your quality of life.

HOA-USA reports that there are more than 370,000 homeowners associations across the country. Almost two in three newly constructed homes are located in homeowners associations, according to the National Association of Home Builders. As such, steering clear of an HOA may be easier said than done. But if you run a business, you'll need to be extremely careful when making an offer on a home in an HOA.

The reason? Just as an HOA might tell you that you can't plant certain types of shrubs in your front lawn or can't have shutters of a certain color, so, too, might the rules dictate that you can't run a business from home. So if that's your plan, that could become a problem.

Get the details before making your choice

Although HOA rules can change over time, if you're buying a home that's part of one, you're generally entitled to see what the rules entail before committing to a purchase. Some HOAs prohibit home businesses no matter what the company is. But other HOAs only prohibit businesses that are likely to result in added noise or other disturbances.

For example, if you're a personal trainer, you may be prohibited from running a business out of your home because conceivably, the noise of clients using equipment could be disruptive. And if you sell clothing, you may be prohibited from running that business because it would likely lead to a constant stream of people and delivery vehicles coming in and out.

But you may be allowed to run a business that has you meeting with a single client in an office, such as if you own an accounting company. And if you're the sole employee of your business and your work is quiet by nature, such as if you do web design or content writing, you may be allowed to conduct business from home.

All told, it's worth getting the details before deciding not to buy a home in an HOA. But make sure the rules are very clear. You wouldn't want your business to fall into a gray area. For example, you may be entitled to run a business from home if it's not disruptive. But that's open to interpretation. Some neighbors might say that having clients come to your door four times a day is disruptive, even if there's no noise to be heard once they're inside. So in that case, running a financial planning business from home may not work.

Of course, you may decide to just err on the side of caution altogether and avoid buying a home in an HOA. And that's not necessarily a bad choice.

HOA rules can change over time. And you wouldn't want yours to change in a manner that compromises your ability to earn a living.