Condo or House as a Rental in Los Feliz: How Do They Compare?

It depends on the rules and the numbers for the specific property. A condo rental answers to the association's leasing rules and carries an HOA fee, but the association handles much of the building upkeep. A house rental has no association rules in most cases, but the owner handles every repair and every vacancy cost alone. Neither wins by default.

At Rooster Homes™ we represent landlords and tenants on leases as well as buyers, so we read a building's rental rules from both sides. This post compares the two as rentals and lays out what to check before you buy either one.

An association can set leasing rules, within limits set by state law. Under California Civil Code section 4741, an owner cannot be subject to a provision that prohibits or unreasonably restricts renting or leasing the unit. An association may limit how many units are rented, but it cannot cap rentals at fewer than 25 percent of the units. It may prohibit short-term rentals of 30 days or less.

Inside those limits, buildings differ. Some cap rentals and keep a waiting list. Some set a minimum lease term. Some require tenants to register with management, pay a move-in fee or follow move-in hours. All of that lives in the CC&Rs and the house rules.

When a California condo sells, the seller provides the buyer with a statement describing any rental prohibition in the governing documents. We read that statement, and the CC&Rs behind it, before you remove contingencies. Our page on investing in a Los Feliz condo walks through the full list.

A house that is not part of an association has no CC&Rs on leasing. Some houses do sit in a planned development with an association, and its rules apply the same way. Check the title report and the disclosures.

A house and a condo both answer to the City of Los Angeles. The City has its own rules for short-term rentals and for rent, and whether a given rule applies depends on the property. Confirm with the City's housing department before you remove contingencies. The association's rules and the City's rules can both apply to the same condo.

Loans for a property you will not live in usually carry different terms than loans for a home you will occupy. Your lender sets those terms.

A condo adds a second review. Some loan programs look at the building as well as the buyer. That review can include how many units in the building are rented, the association's finances and whether the building is involved in litigation. A house loan generally reviews the house and the buyer only.

So bring your lender in early and tell them the plan. If the building does not meet a program's standards, it is better to learn that before you write an offer.

1. Confirm you can rent it the way you plan. For a condo, read the leasing section of the CC&Rs and ask whether a cap applies and whether the unit can be rented when you close. For both, check the City's rules.
2. Estimate rent from comparable leases. We pull recent leases for similar homes nearby.
3. List the monthly costs. Loan payment, property tax and insurance for both. The HOA fee for the condo. A repair set-aside, landscaping and any utilities you will pay for the house.
4. Add turnover costs. Time between tenants, cleaning, and any association move-in fees.
5. Check the reserves and any assessments. A special assessment comes straight out of a condo investor's return. The seller discloses any assessment increase the board has approved that is not yet due.
6. Compare the totals. A unit either works on paper or it does not.

The tax side, including depreciation and any exchange, belongs to your CPA. Our buying process builds time into the offer to read everything first.

• Running the rent numbers before reading the rules. Instead, confirm the unit can be rented first. A full rental cap stops the plan.
• Planning a short-term rental in a condo. Instead, read the CC&Rs. Associations may prohibit rentals of 30 days or less, and the City has its own rules.
• Counting the HOA fee as pure cost. Instead, list what it covers. A house owner pays for the roof and exterior another way.
• Leaving the lender out until the offer. Instead, ask early whether the building qualifies for the loan you plan to use.
• Skipping the board minutes. Instead, read them. Talk of changing the leasing rules often shows up there first.

These are hypothetical examples, not real clients or real homes.

A condo with a waiting list. An investor finds a unit with strong comparable rents. The CC&Rs cap rentals, and the association confirms the cap is full with a waiting list. The investor moves on to a building with open rental capacity.

A house with a large repair ahead. Another investor compares a condo with a house at a similar price. The inspection shows the house roof is near the end of its life. Once a roof set-aside is in the monthly math, the condo's numbers work better, even with its fee.

Rooster Homes™ is a Los Feliz, Los Angeles real estate brokerage owned by Brandon and Sarah Arlington (DRE #02051216) helping buyers and sellers of Los Feliz condos and townhomes. We screen buildings by their rental rules before you tour, run each property's numbers side by side and can represent you on the lease once you close.

Weighing the monthly math too? Read condo vs house price per square foot. When you are ready, send us a note. Let us know what works best for you, and we will coordinate our schedule around yours.

This post explains how the rules generally work. It is not legal, tax or lending advice. For your situation, talk with your attorney, your CPA and your lender.