Should You Buy in a Gated Community?

By: , Contributor

Published on: Feb 10, 2020

A gated community can be ideal for certain types of residents. Just be aware that rules inside those gates are meant to govern homeowners as well as keep out people who don't have an invite.

To most people, gates around a community automatically signify security -- especially when there's a guard at the front and/or patrolling the community's streets. A gated community is also perceived as more exclusive, better maintained, having better amenities. All of these features can be attributed back to the homeowners association -- or HOA -- the organization that oversees a planned community's common spaces and enforces its governing documents.

However, the perception of certain attributes is not always the same as the reality, and some people feel that HOA boards tend to micromanage the small stuff and mismanage the big stuff when it comes to their community. For proof, one can look at the number of condominium complexes that don't pass Fannie Mae certification because their association reserves are too low or the HOA is a party to pending litigation. It makes sense that buyers would think twice about spending more in monthly dues to be part of a community that can't maintain its own finances or upkeep.

Furthermore, 2013 research published in Justice Quarterly found that living within security gates does little to diminish most crime risk, although it does reduce the risk of opportunistic burglaries.

However, homes in gated communities do tend to fetch higher sale prices than similar homes in nearby non-gated communities, according to 2016 American Real Estate Society research. This price bump was not correlated to the common amenities (actually, maintenance fees bring the prices down in communities with luxe amenities) but specifically to the gate itself.

To decide whether you should buy in a gated community, consider the following questions:

Do you plan to buy in a neighborhood with overall high property values?

If your answer is Yes, you are already looking in a neighborhood with high property values, then any minor savings you find in a gated condo development or planned community may not offset the HOA fees and lifestyle/ownership restrictions that an HOA brings.

For example, if the average price of a home in a neighborhood is $500,000, and you plan to buy a $450,000 home in a gated community where monthly HOA dues are $500, you'll wind up paying more for your home if you stay for 10-plus years than if you'd bought a $500,000 home right outside the gated community. And HOA fees don't go toward the loan principal and therefore don't help build equity -- they go to the association coffers, where the money may or may not benefit you over time.

Do you plan to buy in a neighborhood that's already known for its excellent public spaces and services?

If the answer is Yes, the neighborhood you're looking at is known for great community parks, low crime rates, and excellent public schools, then No. You probably don't need the extra security or amenities of a gated community. All the aforementioned public services are paid for out of local property tax dollars, so homeowners in the neighborhood are paying for them already -- typically the higher the taxes, the better the services. The only reason to then pay more to live in a gated community is if you just want an extra sense of exclusivity, but again, the tradeoff will come in the form of HOA dues and restrictions on your homeowner rights.

Do you plan to extensively renovate your property?

If Yes, then you probably don't want to be in a gated community, as HOA bylaws typically make renovations more difficult, often severely limiting what the exterior of your property can look like.

Do you plan to rent out your property?

If Yes, then check the community covenants or HOA bylaws of any gated community you're looking at. Many place strict restrictions on how often homeowners may rent and who they're allowed to rent to (e.g., age-restricted communities). This alone may make a planned/gated community a No for you.

Do you want to put in your own amenities and/or pay for your own memberships?

If the answer is Yes, you want your own style of pool and you have a preferred fitness club that you're a member of, then why would you pay monthly HOA dues that are often for upkeep of shared amenities including a pool area and gym? This answer varies, though, depending on whether the gated community you're looking at actually does have those common amenities and charges for them. Not all do. If the one you're looking at has low fees and few amenities, then you may only be paying for an additional layer of security, which could be worth the expense.

Do you have health or aging issues or supervision concerns?

That is, do you have aging parents or small children who may be better supervised in a more controlled environment that is cut off from major thoroughfares and shopping/business districts?

If Yes, then this is possibly the strongest argument for living in a gated community. Not only do the gates themselves help keep potentially dangerous people out, they also help keep vulnerable residents inside. Also, security personnel can be very helpful in recognizing when certain residents are lost or in distress and making sure that they get back to their safe space and their people.

No matter how nice a home is, there's danger for vulnerable residents who get outside of it if it's located near busy streets and large retail/office areas. Part of the allure of gated communities is exactly what makes them unappealing to others: They tend to be cut off from the outside world with all its action.

How important are owners' rights to you vs. community oversight?

This may be the overriding factor. If your answer is VERY, then it's possible that no benefits of a gated, HOA-governed community will ever be tempting enough to outweigh the friction between you and the association board that wants to oversee and control what you do in your own home. Rental restrictions and regulations around the exterior décor of a property are two major areas where homeowners and association boards clash, but there are others including parking and private outdoor amenities. And of course, special assessment fees.

Are you looking to finance with a government-backed loan?

When you're looking at a brand-new condo development or one where the developers are building a new section, consider this: According to Fannie Mae's guidelines, "New projects where the seller is offering sale or financing structures in excess of Fannie Mae's eligibility policies for individual mortgage loans" will not pass condo review.

This includes builder/developer contributions (when the builder/developer offers credit toward closing costs or unit upgrades) and sales concessions (a gift or favorable deal structure to offset closing costs) -- two areas where developers are known to be very generous when they're trying to sell units while still under construction. The deal might sound great, but you may end up needing to put down 25% and finance the rest through nonconventional channels.

The same holds true for those very luxurious resort-like properties where a certain number of floors are actually flagged as a hotel or where outside entities (not the HOA) operate clubhouses, marinas, restaurants, and other non-incidental amenity space. In short, if you want to live -- or invest -- where others vacation, the government may decline to guarantee the loan that enables you to do so.

Buying in a gated community

Like HOA communities in general, gated communities aren't for everyone, mainly because of the extra fees and extra eyes infringing on owners' rights. But if you like the thought of your property being somewhat protected from the outside world -- and you don't mind dealing with an HOA -- a gated community could be right for you.

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