Neighborhood groups in Indiana increasingly move to limit rental properties, forcing some buyers to put homes back on the market; restrictions include residency requirements, limiting number of homes in neighborhood that can be rented

Allison Oesterle

GREENWOOD, Indiana , November 2, 2013 (Associated Press) – Indiana neighborhood groups crack down on rental properties amid investor purchases

Neighborhood groups across Indiana are placing limits on rental properties after a wave of purchases by investors in the past year, forcing some of the buyers to put the houses back on the market. Companies like American Homes 4 Rent have been snatching up vacant houses, contributing to a 19 percent increase in sales of existing homes over the past year. But the investors are increasingly running into issues with homeowners associations worried about the impact of rentals.

Indianapolis attorney Scott Tanner said many associations are banning or restricting rental homes because of fear that renters don't have as much invested in a neighborhood and won't take care of properties, which could cause home values to decline.

Restrictions can include banning rentals except in cases of financial hardship, requiring people to live in the houses for two to five years before using them as rentals and limiting the number of houses in a neighborhood that can be rented.

Tanner told the Daily Journal (http://bit.ly/17WuBzV ) he has worked with about 20 homeowners associations this year to write new rules limiting rentals.

"I'm getting a lot of work out of it because people are trying to stop this before it gets way too out of hand," he said.

In some cases, investors have put a house back on the market after learning of association restrictions on rentals. That happened in The Pines of Greenwood, where American Homes 4 Rent bought a house in October 2012 but now has it back on the market.

Chief operating officer Jack Corrigan said the company doesn't research every homeowners association's rules before buying because it's cheaper and more efficient to purchase houses while prices are low. If the company later learns a neighborhood restricts rental properties, American Homes 4 Rent avoids buying there in the future, he said.

"Because we've made money most of the time selling them, it hasn't been that problematic for us. It's a good business when you can make an error and make money at it," Corrigan said.

Corrigan said that only 100 to 150 of the approximately 22,000 homes the company has bought nationwide have had to be resold.

But Tanner said the California-based company's purchase of 1,800 properties in central Indiana has "gotten people's attention and gotten reactions."

Some homeowners associations say it's better to have rental properties than foreclosed and empty houses, which often aren't maintained and can require the homeowners association to handle trash removal and mowing until a bank takes over the property. In Franklin's Heritage subdivision, about a third of 460 houses are rental properties, homeowners association president Tim Hubbard said.

"As long as things are being maintained and taken care of, I don't see why the board needs to get involved," Hubbard said.

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Information from: Daily Journal, http://www.dailyjournal.net