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California’s single family zoning laws have changed under SB-9, providing new financial opportunities for homeowners in CA through renting.

SB9 And The Financial Opportunities for Californian Homeowners

Single-family zoning laws have changed in California under Senate Bill 9 (SB-9), creating real financial opportunities for eligible homeowners.

For decades, California’s single family zoning laws saw incremental rather than tectonic shifts. But the housing shortage has changed that, and changed it profoundly.

The first revolution brought the phrase “ADUs” – or Accessory Dwelling Units – into the public consciousness. It gave homeowners greater latitude to convert under-utilized spaces within their homes (think garages, basements, and attics) into livable, rentable spaces, and also incentivized the construction of free-standing cottages and guesthouses on their property.

If you’re a homeowner looking to generate incremental rental revenue, building an ADU is a potential opportunity. Similarly, Senate Bill 9 offers a potential subdivision opportunity. Which means you could keep living in your current house, and build a new rentable structure alongside it.

This second revolution, which came into affect in January 2022 makes provisions for dividing properties, allowing homeowners to split a single-family lot into two lots, add a second home to their lot or split their lot into two and place duplexes on each. The last option would create a maximum of four housing units on a property currently limited to a single-family house.

That represents a dramatic change from current regulations, wherein a single-family lot is only permitted to contain a free-standing house and an accessory dwelling unit, plus an attached junior unit that is 500 square feet or less.

The goal of SB-9 or "the Califonia H.O.M.E Act" is to provide options for homeowners to build wealth while providing affordable rental opportunities to other families. Rather than targeting traditional real estate investors, the bill seeks to benefit homeowners and families, with an owner-occupancy requirement in place as a condition to receiving the lot split. 

Here are some of the most frequently asked questions on SB-9:

Can any homeowner or property owner take advantage of this new law?

Though the laws are fairly accommodating, you can only “upzone” your property if the resulting 2 lots are 1200 square feet or larger. You can’t destroy or alter a house that has been used for affordable or low-income housing in the past 3 years either.  And laws regarding historically landmarked buildings remain unchanged, so you can’t demolish or change one in order to take advantage of SB-9.

Other limitations are that you can’t use the new construction for short-term rentals (less than 30 days); and the owner of the property must occupy the main house on the lot for at least 3 years after construction has concluded. Also the new construction can’t be used as a commercial space.

How can the state predict if I am going to stay in my house for three years?

The folks in Sacramento don't have a crystal ball. But anyone looking to build an ADU must sign an affidavit which represents they will occupy one of the units as a primary residence after the split or the construction of an ADU.

Is it possible to subdivide a lot more than once? 

Nope! No more than four housing units can be created on a single lot. 

How are zoning laws applied to these new constructions?

Except for the fundamental change enacted by SB-9, zoning laws remain intact.

Get help creating a rental unit in California

Between SB-9 and the increased flexibility when it comes to constructing ADUs, it’s never been easier to build a rental unit in California. And with access to Belong and its teams of Pros, it’s never been easier to maintain one. Learn more about how Belong can help you navigate the rapidly changing landscape of California real estate. 

SB9 and Financial Opportunities for Californian Homeowners

See how owners of rental properties can use Qualified Business Income (QBI) Deductions to reduce their tax bill thanks to what’s called a 199A deduction.

What Are Qualified Business Income Deductions For Landlords?

Also known as the section 199A deduction, the Qualified Business Income (QBI) Deduction lets landlords potentially deduct up to 20% of their qualified business income (QBI). Let’s look at this in more detail.

Can I get the QBI deduction on rental income?

The good news is that any non-corporate landlord should qualify for the deduction.

Rentals that are classified as trades or businesses under IRC § 162 are not considered passive. If the management of the rental property rises to the level of a trade or business as defined by § 162, then it qualifies for the deduction. 

Rental properties are typically treated as passive activities—these are excluded from the definition of a qualified trade or business. But it’s important to understand the following:

You might qualify for the QBI if you’re organized as an S-Corporation or a pass-through LLC, estate, or trust (If you’re a C-Corp, you’re out of luck.).

Rental income declared on a Schedule E or K-1 also qualifies.

If you pass hurdle #1, you might qualify if you meet a number of conditions.

If you spent more than 50% of your time during a tax year in your real estate business – and that represented more than 750 hours in the same year, you passed the next hurdle. Congratulations!

The QBI is a deduction that you take on top of the standard deduction if don’t itemize, or the itemized deduction if you do.

But you’re not there yet. Your QBI is subject to limitations based on your taxable income that include the following:

The amount of W-2 wages paid by the qualified trade or business; and

The unadjusted basis immediately after acquisition (UBIA) of qualified property held by the business, which is the basis of the qualified property on the placed-in-service date.


Note that only items included in a landlord’s taxable income can be counted toward the QBI deduction. Some of the most common income sources include rent, non-refundable and forfeited deposits, late payment fees, pet fees, and federal rent subsidies (HUD). This also generally includes, but isn’t limited to the deductible part of self-employment tax, self-employed health insurance, and deductions for contributions to qualified retirement plans.

The safe harbor rule comes into play when a landlord owns a handful of rentals but doesn’t qualify as a real estate professional. In this situation, he or she can still qualify for the QBI deduction, provide the rental activities constitute a trade or business.

The IRS published a notice in 2019 that provides a safe harbor for landlords to qualify for the IRC Section 199A deduction. In order to qualify the three requirements that must be satisfied:

Keep separate books and records to show income and expenses for each rental real estate enterprise;

Perform at least 250 rental services (Or other services, such as those provided by tradesmen and property managers) per year. Activities that satisfy the 250-hour requirement include landlord-related. The IRS says that rental services also include:

(i)         	Advertising to rent or lease the real estate;

(ii)       	Negotiating and executing leases;

(iii)     	Verifying information contained in prospective tenant applications;

(v)       	Daily operation, maintenance, and repair of the property;

(vi)      	Management of the real estate;

(vii)    	The purchase of materials; and

(viii)  	Supervision of employees and independent contractors.

3. Keep contemporaneous records of time reports, logs, or similar documents, such as hours of services performed; dates and descriptions of services performed; names of those performing such services.

Note that the safe harbor doesn’t apply to triple-net leases because the tenant is responsible for costs that would otherwise be the responsibility of the owner. As such, the IRS says that the rental income from a triple-net lease doesn’t qualify as trade or business income. It’s merely investment income.

If a landlord doesn’t qualify for the safe harbor, 20% of his or her rental income may still qualify as trade or business income, if they must meet some additional requirements

In 2021, real estate investors earning over $329,800 (if married and filing jointly) or $164,900 if filing as a single individual can claim the deduction as a percentage of wages paid with respect to the trade or business, or the combination of a percentage of wages paid, plus a percentage of the unadjusted basis of the property. These limitation thresholds are adjusted annually for inflation.

Landlords who own multiple rental properties should note that there are additional planning strategies that can maximize the IRC Section 199A deduction.

The Section 199A deduction is scheduled to automatically expire in at the end of 2025. In order to claim the current section 199A deduction, taxpayers who own real estate must be able to show that they’re operating a real estate business as a trade or business and not simply holding real estate for investment.

Keep in mind that, as helpful as this piece might be, we strongly advise that you speak to your accountant to get a firmer grasp on the implications and ramifications of the laws being discussed here. They will have a much firmer understanding of your individual circumstances and can clarify any questions this post might have raised.

Property management was unsatisfactory for both homeowners and renters - until two entrepreneurs decided it was time to disrupt the old model with Belong.

How Two Entrepreneurs Are Elevating Property Management

Property management was unsatisfactory for both homeowners and renters - until two entrepreneurs decided it was time to disrupt the old model with Belong. Read on for the story of how Belong started and their mission. 

In the case of Belong, our founders – Ale Resnik and O. Savir – were inspired by their experiences with the very act of “Belonging.”

They captured it poignantly and personally in a blog, writing:

We are a company started by immigrants. As immigrants, we had to redefine, multiple times and in numerous ways, what Home meant to us.

Is Home the walls around you and the ceiling above you?

As they began thinking deeply about what home meant – along with another founder, Tyler Infelise – these imaginative serial entrepreneurs had an important revelation about its fundamental essence.

They put it eloquently in that same blog post:

“With time, we discovered that Home isn't a place. Home is a feeling. Home is where our heart is.”

As they looked for their next entrepreneurial venture – conducting a lot of research and spending a lot of time talking to friends and family – an opportunity began to take shape.  An opportunity that involved a total, bottom-up reinvention of something known as “property management.”

Ale and O decided to take on this challenge because they saw that the need was great.  As they wrote, “We chose an industry that hadn't changed in centuries and offered no elements of delight to those it was meant to serve.”

The founders recognized that tenants often feel like temporary guests living in somebody else’s home.  Some are treated badly (we’ve all heard our share of landlord horror stories), and often are treated like second-class citizens.  So the company’s mission – concisely put – is to make tenants feel like they belong. 

Central to the vision that these two founders had was to create a company where people who loved their houses  – Belong calls them “homeowners” –  could be connected to people who would love them as much as they do.

If you’re a homeowner – whether you are downsizing, or are dealing with a long-term family home – Ale and O have built a system and culture where you will be incredibly well looked after.

Read about Belong’s unequaled suite of services here.

Belong will find the perfect residents, screen them, and help them move in – and you move out – with precision and care.  They use technology to streamline, and committed Concierges (people, not bots) to make sure everything runs perfectly. 

Once someone moves in, their full-time team of Belong Pros handles all maintenance – expected and unexpected – which is a remarkable service in a world where reliable and talented contractors are in great demand.  It feels great when work is done right the first time around.

Another benefit of Ale and O’s vision is that happy residents – which they enable – will stay longer and reduce vacancies, which are expensive!

If you’re a homeowner, Belong’s founders have built something that can, candidly, rock your world.  Ale, O, and Tyler wrap it up like this:

“We love building products that make people happy. More specifically, we love surprising people with something they never thought could make them happy.”

Disruption is here. Get ready to be delighted.

Houseplants are a great way to brighten up any home and a budget-friendly way to add value and warmth to a rental property. Here are 5 of our favorites.

5 Plants That Will Brighten Your Rental Investment Instantly

Houseplants are a great way to brighten up any home without a massive investment, making them a budget-friendly way to add value and warmth to a rental property. Here are 5 of our favorite house plants for adding life to rental homes. 

Think of the trends we’ve seen emerge on Instagram and elsewhere over the course of the past year and a half: puppies, sourdough, and houseplants. It is no coincidence that all these trends revolve around living, breathing things — yes, even sourdough, with its bacteria and yeast giving rise to each and every X-scored loaf. In fact it makes perfect sense: inundated with such dark news it’s no surprise that, subconsciously or not, people began to surround themselves with things that grow, change, and give us hope for the future. Because when we see things growing we feel more alive. 

That’s why Belong encourages everyone in their community, homeowners and residents alike, to cultivate some plant life in their homes. We all know what a charge of life we feel when we walk into a space filled with plants. What’s more, if a plant looks healthy and cared for, it feels safe to assume that the house it lives in is treated just as well, if not better.

We’ve written before about how to build a beautiful backyard, but to help you spruce up the inside of your home, here’s our list of 5 great houseplants.

We love the look of palms in general — the fronds spreading like the fingers of a hand, so thin and delicate and beautiful they seem to be waving at you, calling for your attention.  But most palms require a lot of care and a lot of sunlight. The Lady Palm is the exquisite exception; though it doesn’t lack for palminess, it also doesn’t need much sunlight, making it a perfect indoor plant.

There’s something about the spongy leaves of a jade plant that we find wonderfully sumptuous. They’re as pleasing to look at as they are to touch, too: the beautiful contrast between the thick, heavy branches and the beautiful contoured leaves is a visual.  They’re also very easy to care for: because they’re succulents they can sometimes go months without being watered!

What’s more, the jade plant is also called the lucky plant or money plant, which makes it a wonderful present for a homeowner to leave for a new resident.

Like the idea of a succulent, but looking for something a little more visual drama than a jade provides?  A snake plant might be right for you.  Its leaves are long and flat and far more striking than the jade’s. But much like succulent cousin, it only needs to be watered occasionally (in fact, in the winter, it can go up to 2 months without any H2O).  And it doesn’t need a lot of light to thrive, making it ideal for apartments and rooms that don’t get much sun!  Also, a NASA study shows that it actually cleans the air. 

A flowering plant, the clusters of pretty, pink blossoms add a pop of color and a lovely scent to any room.  They only need indirect sunlight and are drought resistant, too, which makes them the ideal plant for novice plant owners. 

A hanging plant with long cascades of delicate vines, the String of Hearts adds a touch of drama to any room.  It retains water well, too, so it doesn’t require helicopter plant parenting, and its pink stems and waxy leaves make it more colorful than your typical houseplant.

There are lots of ways to create a home that someone will love, but there’s nothing that creates as much impact with as little cost or effort as houseplants! If you're looking for bigger changes, check out the top design trends for 2022. 

Belong

Ale Resnik

Afton Brazzoni

Ashleigh Graf

Lauren Slagter

Adam Hanft

Ale Resnik

Afton Brazzoni

Ashleigh Graf

Lauren Slagter

Adam Hanft