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10 ways to pay for a home renovation and the pros and cons for each

How to Finance Home Renovations and Improvements

When deciding how to finance home renovations — is it better to pay in cash or look at finance? Before you choose, it’s worth considering whether the renovations will increase the value of your property. Whether it’s the resale value or to get a higher rental income price, doing your homework in the local neighborhood and speaking to real estate professionals and contractors (such as Belong), can help to determine your projected return on investment. 

Once you’ve crunched those numbers, you can use them to determine the best way to fund the renovation. For example, if house prices are rising in your neighborhood, you may have received a nice boost in your home equity, which can be used as a source of funds to finance an improvement before selling the home. 

If you own a rental property, it might make sense to use your rental income to help finance your repayments on upgrades that will help increase the value of your home long-term. 

If your home has a livability issue that needs repairing, it could be a good idea to look at finance options that you can access immediately, so that small problems don’t turn into bigger, more costly ones. 

Once you’ve considered your budget and return on investment, here are 9 finance options that can cover the costs of a home renovation. 

9 ways to finance home renovations — and their pros and cons

Using cash makes sense for smaller projects or renovations that sit well below your cash reserves. If you have just enough to cover the budget, this option carries higher risk as you may run out of money to fund unexpected expenses or leave yourself with no safety net for other emergencies unrelated to your renovation.

Here are is a quick comparison of the pros and cons of paying for a home renovation project in cash: 

The least expensive option, with no interest charged

No applications, fees, or repayment terms to manage

Easy to determine a budget within your means

Depending on your savings, it might not be feasible for large projects

You need to have enough cash reserves to fund contingencies and unexpected budget blow-outs

It ties up a large amount of cash that you may need to access in an emergency

2. Borrowing money from friends or family

The “Bank of Mom and Dad” can always be a tempting option for homeowners with parents who have the capital or cash to lend. As this would involve paying in cash, it’s another ‘cheap’ option in terms of not paying interest —but borrowing money from loved ones can be costly in other ways! 

Here are is a quick comparison of the pros and cons of paying for a home renovation project by borrowing cash: 

Like cash, there is no interest or application fees involved

Your family may want to help you build capital once they have paid off their own home

Borrowing money could place a strain on your relationship if you can’t make regular payments or take too long to pay off the loan

It ties up a large amount of cash that doesn’t belong to you, which may leave the lender in a tough spot in an emergency

If you have owned your home for a while, you will have built up equity in the property that you can borrow against. This could be accessed as either a Home Equity Line of Credit (HELOCs), or taking out a Home Equity Loan. Typically you will need to have paid off at least 15-20% of your home to qualify. This option makes sense if you have built considerable equity in your home and aren’t sure of what the renovation costs are going to be — or want to keep your savings on hand. 

Here are is a quick comparison of the pros and cons of paying for a home renovation project by using the equity in your home: 

For HELOCs there is no need to apply for a separate loan, you can redraw the funds as needed and tap into as little or as much as you need

You may be eligible to claim a tax deduction, particularly if you are funding necessary repairs on a rental home — or making capital improvements than can be depreciated

Interest rates are lower than a personal loan or credit card

A Home Equity Loan will require an application and can have a higher interest rate than HELOC

Interest rates are variable and could impact your budget as they rise

Adds time on your mortgage to draw down in the equity in your home

The amount will affect the debt-to-income ratio on your credit rating, even if you don’t spend the whole amount

Your home needs to be collateral and repayments will be due on top of your mortgage

A cash-out refinance allows you to refinance your mortgage for a higher amount and use the extra cash to finance your home renovation and remodel projects. If you've locked in a record-low rate this might not be the best option. But if you have a variable loan or a less-than-favorable rate, it could work for your financial situation. 

Here are is a quick comparison of the pros and cons of paying for a home renovation project with cash-out refinance: 

It could be a good time to refinance your mortgage and negotiate a better deal on your repayments

As it makes up part of your mortgage, you only have the one repayment amount to make

You could be resetting the clock on your mortgage time, so think long-term and make sure you’re not still going to be making repayments well into retirement

You need to reapply for a mortgage, which can be complicated and time consuming, especially if your circumstances have changed recently

You will be making interest payments on the amount for the full life of your mortgage, which is considerably longer than standard financing 

When it comes to home renovations is it better to pay in cash or look at finance? Here are 10 ways to pay for a home renovation and the pros and cons for each.

Learn more about investing in, pricing, and managing a rental property in San Francisco's Bay Area.

The Local Investors' Guide to Bay Area Real Estate

With first-class employment opportunities attracting the brightest minds from all over the world, San Francisco's Bay Area is undoubtedly a desirable place to own a home on the rental market. Bay Area homes attract some of the highest rents across the country — but they can also be the most unpredictable. After a rollercoaster few years fuelled by the pandemic and relocations, this guide brings together some handy resources for anyone who owns or is considering purchasing a rental property in the Bay Area. 

How much property tax will I pay in the SF Bay Area?

The average property tax rate in for California state is 0.75%, however the City and County of San Francisco is slightly above this. The secured property tax rate for the 2022-2023 fiscal year sitting at 1.179% (sourced from SF’s Treasurer and Tax Collector, accurate as of July 2023).  

This is assuming your home is being used as a long-term rental and not for short-term vacation stays. San Francisco has an additional Transient Occupancy Tax (TOT) of 14% on the rental of properties for stays of less than 30 days, to be collected from guests. You can learn more about your tax obligations and reporting requirements for short-term rentals (including Airbnb) here. 

How much rent should I charge in the SF Bay Area?

After years of astronomical growth, San Francisco’s Bay Area remains among the top 10 most expensive cities in the country to rent — even when inner city rents dipped during the pandemic-led exodus. Most of the Bay Area rebounded quickly and even in areas that are still down on pre-pandemic levels, rents aren’t exactly low. 

But with a state of flux, coupled with rising interest rates and troubling inflation, homeowners could be forgiven for thinking that you need a crystal ball to price your Bay Area rental. But Belong has a better solution, based on real-time demand.  

Looking at hard numbers and comps alone isn’t enough when the market gets complicated. Or looking to outdated models such as asking for 1-2% of the mortgage rate or property value. Yet that’s exactly what real estate agents and property managers do, because it’s the way it’s always been done. 

But we’re playing a different game now. Property values have changed from that once-neat sum. And as workers return to the Bay Area, the wish list of amenities has changed. People have become accustomed to more space. They want outdoor areas, fast wifi and home offices. Studios and 1-bedroom apartments are still trickier to shift, while roomier single-family homes like the one on Belong’s network are being snapped up soon after listing. 

Belong addresses market complexities and shifts by taking a modern approach to pricing homes for rent. In fact, Belong has ditched the property management model to offer a completely unique service that takes a humanized approach to the rental market —  including pricing. 

When helping owners price rentals in SF’s Bay Area, Belong uses technology to blend live market data with an all-important metric: real demand for each home. We determine the right price for your home that will maximize rental income and keep vacancies low, long-term. And because we extend our services to renters as part of our community, we attract the best of the best to place in your rental property. 

Read More: Bay Area Prices are in Flux: How Much Rent Should You Charge? 

Are there rent control ordinances in the Bay Area?

Yes, like many areas within California, the City and County of San Francisco has a rent ordinance for properties in the Bay Area. The Rent Board seeks to protect residents from excessive rent increases and inject evictions, while allowing homeowners to seek fair rent for their homes. 

This makes getting the pricing right for your Bay Area home all the more important. You cannot increase rents more than once a year, increases are capped, and you can’t evict a resident without just cause (for example, to seek higher rent). 

Read More: Everything You Need to Know About California’s Rent Control Laws

Who are the best property management companies in the Bay Area?

The best way to ensure your new investment home is well-kept and profitable is to find the best company to help you manage it. But when comparing the best property management companies across California, you’ll be looking at a handful of differences between them all. Things like how much they charge for management fees and how often you’re going to get slogged for more (if they even tell you!). 

With Belong, there’s no comparison. Because Belong isn’t a property management company, it’s a completely unique experience that is humanizing the rental market. Belong does things differently, offering:

Guaranteed Rent: Receive your rent on time, every month, regardless of when it’s paid by residents.

24/7 Concierge Support: Both homeowners and residents have access to real-time support, going beyond emergency maintenance requests.

Transparent fees: No hidden costs like setup fees or lease renewal charges.

Modern-day marketing: Virtual tours and video marketing is included in listings.

User-friendly app: Belong's app provides convenient access to documentation, cash flow insights, and financial and insurance solutions. 

Long-term residents: Belong takes a personalized approach to match the right people, so they stay longer and feel at home.

Innovative financial solutions: Homeowners can manage cash flow effectively, even splitting the cost of maintenance and placement fees.

Eviction protection: Owners are shielded from legal costs if we ever place the wrong people

Extensive vendor network: Belong connects homeowners with a vetted network of over 10,000 professionals for repairs and renovations.

Comprehensive insurance solutions: Belong offers insurance options that protect homeowners, their properties, and residents.

Market-driven insights: Belong utilizes market data and real-time interest to maximize the value of your home.

Even though Belong topped the list when we compared Calirfornia’s top-ranked property managers, it became clear we were comparing apples with oranges. Find out if your Bay Area property is eligible for Belong here. 

Read More: We Outrank The Best Property Management Companies in California

Discover why San Francisco’s Bay Area loves Belong

If you own a condo or single-family home in San Francisco, Belong offers our unique long-term residential rental experience to all Bay Area neighborhoods. Our local team will go out of our way to find great long-term residents that will love your SF Bay Area home as much as you do. But don’t take our word for it, here is what homeowners are saying about us…

Overall my experience with Belong has been exceptional. We had a second house which was older and had a lot of deferred maintenance. We decided to turn it into a rental. We hired Belong and they completely remodeled the house, put it on the market and rented it within two days at asking price. They have interfaced with the renter leaving me free from much of the hassle of renting out a house.” - Kelly F

The Belong team is top notch…They have consistently pursued the best options for both the Landlord and Tenants, and are a model of what professional management companies should be. I highly recommend Belong!” - Frank L

Think your home belongs with us?  Visit our homeowner's page to find out more about how our services are helping people to ditch property management in San Francisco, Oakland, Sacramento, Alameda, Palo Alto, Sausalito, Santa Clara, and many more.

Bay Area attracts some of the highest rents in the country. Learn more about investing in, pricing, and managing a rental property in San Francisco's Bay Area.

Should you require tenants to have renters insurance? Learn more about renters insurance and the kind of protection it provides for landlords and rental homes.

What Renters Insurance Should You Require Your Tenants To Have?

Renters insurance is a type of insurance policy that provides financial protection for individuals who are renting a home. It covers personal belongings and provides liability coverage for residents. Renters' insurance is usually relatively inexpensive and can provide peace of mind for tenants by protecting their personal belongings and financial interests.

Renters insurance also provides protection for homeowners by reducing the risk of legal action taken against them if their residents are held liable for damage that occurs on the property. This is why many homeowners choose to require tenants to obtain and hold renters insurance for the duration of their lease term.

It is important to note that renters insurance does not cover damage to the rental property itself. Landlords will typically need to have their own insurance policy to protect against damage to the rental property and other risks associated with being a landlord.

Should you require your residents to obtain renters’ insurance?

Most apartment owners and landlords do require their tenants to have renters’ insurance. As a homeowner of a single or small number of rental homes, should you? There are two reasons to consider requiring your residents to obtain renters insurance:

Protection for you: If your tenant is held liable for an injury or damage that occurs on the rental property, their renters insurance may cover their liability, protecting you from financial responsibility.

Protection for your residents: Renters insurance can provide financial protection for your tenants in case of damage to their personal belongings or liability for injuries sustained on the rental property. Renters insurance can also provide your tenants with temporary housing if their rental unit becomes uninhabitable due to a covered loss.

What kinds of renters insurance products are there?

There are generally two types of renters insurance. Actual cash value coverage covers the cost to replace your personal belongings, minus depreciation. Replacement cost coverage covers the cost to replace your personal belongings without taking depreciation into account. This means that you would be reimbursed for the full cost to replace your personal belongings with new items of similar quality.

Some policies may offer a combination of actual cash value and replacement cost coverage, with different limits and deductibles applying to different types of losses.

What type of renters insurance should you require your residents to have?

Most landlords, especially corporate landlords operating apartment buildings or multi-family units, require tenants to obtain renters insurance with at least $100,000 in liability coverage.  

You should require your tenants to have coverage that is sufficient to protect their personal belongings and cover any potential liabilities. This may include coverage for personal property, loss of use, and personal liability.

Depending on where your home is located, you should be aware of any exclusions in the policy, such as coverage for flood damage or earthquakes, as these types of events may not be covered under a standard renters insurance policy. If you are in a flood risk area, for example, you may want to require policies that cover flood damage. 

Does Belong require residents to obtain renters’ insurance?

Belong requires all residents to obtain renters insurance with $100,000 in liability coverage in order to rent a property cared for by Belong. Residents have the option to opt-in to renters insurance set up by a Belong partner so they can roll the cost of the insurance right into their rental payment, saving them time and headache on choosing a provider. For more information, please contact your local Belong team.

How to spot the difference between a buyers and sellers market to determine if you should sell or rent out your property in your local real estate market.

What is The Difference Between a Buyer's Market and a Seller's Market?

As interest rates continue to rise and talks of a recession continue, homeowners may find themselves unsure of how to manage their investments, especially their real estate assets. Terms like “buyer’s market” and “seller’s market” are common in discussions around the real estate market, but what do these terms really mean? In this post, we’ll define these terms and discuss how the market you’re in will impact your investment decisions.

In a buyer's market, there is an excess of homes for sale, indicated by lower prices and more frequent seller concessions. On the flip side, in a seller’s market there is a scarcity of homes for sale, leading to higher prices and more competitive behavior from buyers. 

In a market with surplus inventory, buyers have more negotiating power and sellers may be more willing to accept lower offers. In a market with low inventory, sellers have more bargaining power because there are fewer properties available and more buyers interested in purchasing them.

How to tell if you are in a “buyer’s market” or “seller’s market” 

Though many media outlets will discuss the state of the market as a national phenomenon, the truth is that the state of local real estate markets varies widely across the country. Topeka may be a buyer’s market while Albany is a seller’s market. And it’s not static, each local market will shift and change with supply and demand. 

There are a few factors to consider when trying to understand your local real estate market:

1. The number of homes for sale: Like so many areas of the economy, the real estate market is greatly impacted by supply and demand. If there are lots of homes for sale in your area, you’re likely in a buyer’s market, and vice versa. 

2. Average number of days on market: If properties in the area are taking longer to sell, it may be a buyer's market. In a seller's market, properties typically sell more quickly.

3. Frequent price changes: If the prices of homes in the area are decreasing or staying the same, it could be a buyer's market. The inverse is true for a seller’s market. 

If you are in a buyer’s market, is it better to rent out your home or sell it?

If you believe your home is located in a buyer’s market, should you sell your home or turn it into a long-term rental? It depends. Here are a few things to consider when deciding whether to rent out or sell your property in a buyer's market:

1. Your financial situation: If you have the financial stability to hold onto your property and collect rental income, you can continue earning equity and take advantage of tax strategies as your home value grows, while also collecting passive income. If you need liquid cash in the short term, you may be better off selling, even in a buyer’s market where you may not make as much from the sale.

2. Your future plans: If you’re moving out but you think you may want to return to your home or area in the future, renting it out could be a good option. With the right residents in place, your home can be cared for and earn you rental income, while also appreciating in value, before you return. 

3. The condition of the property: If your property is in good condition and is likely to attract renters, it could be a good choice to rent it out. However, if the property needs significant repairs or upgrades, it may be more cost-effective to sell it. (Your local Belong team can help you understand how marketable your home is and the cost of any needed repairs.)

Read More: Renting vs. Selling 101: The Homeowner’s Guide

If you are in a seller’s market, is it better to rent out your home or sell it?

In a seller's market, there is generally high demand for properties, which can lead to higher prices and more profit for you. However, there are a few things to consider when deciding whether to rent out or sell your property in a seller's market:

1. Your financial situation: If you need to sell your property in order to free up cash, it may be a good idea to sell it, especially in a seller's market when prices are high. On the other hand, if you are able to hold onto your property and collect rental income, this may be an even better option for long-term passive income. 

2. The condition of the property: If your property is in good condition, it is more likely to fetch multiple offers, perhaps even above the asking price. However, properties in good condition also rent fast, and for top dollar. 

3. The local rental market: It's important to consider the demand for rentals in your area when deciding whether to rent out or sell your property. If there is strong demand for rentals, it may be a good time to consider renting out your property.

Whether you own a home in a buyer’s market or a seller’s market, whether you’re determined to sell or interested in renting out your property, Belong can help. Our local experts are ready and waiting to answer your questions and help you understand the pros and cons of turning your home into a long-term rental that residents will love. 

Belong is a modern alternative to traditional property management, offering homeowners an unparalleled set of features and perks, including: 

Guaranteed rent every month, regardless of if or when your residents pay

Optimized rental pricing that uses technology and real-time demand to price your home with accuracy

The Belong app that gives you and your residents access to everything you need

Innovative financial products including the option to spread maintenance payments over the term of your lease agreement

Access to dedicated landlords insurance to protect your asset (as well as coverage for your residents)

Integration with the most popular rental platforms to get your home loved faster

Instant access to an expansive vendor network of over 10,000 professionals that can handle everything from routine repairs to home upgrades

Ready to learn more about how Belong is changing the world of home management and renting forever? Visit our homeowner's page to find out more about how our services are helping people to ditch property management in Seattle, Redmond, Oakland, San Francisco, San Diego, Los Angeles, Tampa, Orlando, Jacksonville, Miami and many more.

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