Why I Lost $10,000 on an HOA Property—And Why You Should Avoid It Too

Investing in real estate can be a lucrative venture, but not all properties are created equal—especially those with homeowners' associations (HOAs). My personal experience with an HOA property taught me a valuable lesson, one that cost me $10,000. I’m here to share why pursuing a property in an HOA for assisted living or any business-related purpose is not worth the risk, and how you can avoid making the same costly mistake.

The Pitfalls of HOAs for Assisted Living Facilities
When I first looked into buying a piece of land for a 16-bed assisted living facility, I found a beautiful five-acre plot. The property was in an HOA, but I wasn’t worried. It wasn’t a cookie-cutter suburban HOA—this one was in a rural area with large parcels of land, and there was already a licensed assisted living facility nearby. I thought I had done my homework. I even reached out to the HOA’s vice president to confirm it would be okay to proceed.

He assured me that as long as I submitted a letter from my attorney confirming Fair Housing rights, I'd be fine. I made an offer and entered escrow. Everything seemed to be on track.

That is, until I received a rejection from a different HOA representative. Suddenly, my variance request was denied, and I wasn’t allowed to pursue my plans. The story doesn’t end there—the neighborhood went into an uproar, and I received a legal threat from a neighboring property owner.

Why HOAs Are a Risky Investment for Assisted Living
You may have heard some people say that Fair Housing laws prevent HOAs from discriminating against elderly or disabled care facilities. While this is technically true, winning that legal battle is a long, expensive, and frustrating process. Even if you're in the right, the reality is that HOAs can still make your life miserable. Here's why:

HOA Lawsuits Are Inevitable: Even if your HOA legally cannot prevent you from operating an assisted living facility, that doesn’t stop them from taking you to court. Lawsuits can drag on for months or even years. In my case, my attorney estimated that it could take up to 18 months and cost me at least $50,000 in legal fees—money I may never get back.

Unpredictable HOA Decisions: HOAs can flip-flop in their decisions. Just like in my experience, one person may approve your plans while another shuts them down. There’s no consistency, and if the neighborhood gets involved, as it did in my case, your dream project could face fierce opposition from residents who don’t want you there.

Holding Costs Add Up: While you wait out legal battles, your costs will keep stacking up. Mortgage payments, property taxes, insurance, and other holding costs don’t pause just because you're stuck in a legal limbo. Imagine having your capital tied up for over a year without being able to move forward with your plans.

Resale Restrictions: Even if you manage to get through the lawsuit and operate your business, selling the property down the line can be a nightmare. HOAs can impose restrictions on new buyers, and future owners may not be able to continue running the same type of business. A colleague of mine was stuck in this exact situation—her assisted living facility had operated successfully for years, but when she went to sell, every potential buyer was told by the HOA that they couldn’t run the same business. Now she’s trapped with an unsellable property.

Cut Your Losses: Find a Property Without an HOA
After spending weeks battling the HOA, I had to make a difficult decision. I had already put down a non-refundable $10,000 deposit. Walking away from the deal meant losing that money, but continuing would have meant legal battles, delays, and significant holding costs. Ultimately, I chose to cut my losses and find a different property—one without an HOA.

Within weeks, I found another piece of land, and this time, it was in the right zoning area, with no HOA restrictions. I could finally move forward without the looming threat of legal trouble.

The Bottom Line: Avoid HOA Properties for Business Investments
If you're considering buying a property in an HOA, whether for assisted living or any other business purpose, stop right there. Even if you think you can navigate the rules or find a loophole, the potential risks far outweigh the benefits. HOAs are notorious for changing the rules and creating roadblocks that can drain your time and money.

Instead, focus on properties that are free from HOA restrictions. Look for commercial or agricultural zoning areas that allow more flexibility for your investment.

​Learn from my experience—don’t waste your time or money fighting a losing battle with an HOA. Instead, invest in properties where you can build your business without unnecessary headaches. After all, time is money, and when it comes to HOAs, both are at risk.