Inheriting property can have tax implications depending on what you do with it. Here are some tax considerations for inheriting property in the US.

Tax Considerations for Inherited Properties: What You Need to Know

If you inherited a property in the last twelve months, you might be wondering about what the tax considerations are for the upcoming tax season.

Most inheritances aren’t considered income for federal tax purposes. What happens next is where it becomes less straightforward. Whether you sell the house, move in, or rent it out will change the tax implications for the property.

In this article, we will look at the tax considerations for inherited property based on federal and state taxes, as well as whether you choose to keep or sell the home. 

Tax considerations for inherited properties when the estate is transferred

There are four main taxes that could apply to an inherited property as part of a transfer of estate:

Federal estate tax is a tax on the transfer of property at death, taken from the estate. It won’t apply to most estates with a single property, because estates valued at less than $12million are excluded. But if your inheritance includes valuable assets, it may exceed the exclusion amount and need to be filed in an estate tax return. 

The exclusion amounts change year-to-year to account for inflation and are currently:

The tax only applies to the value above the exemption amount, so even if the estate was worth $13million, 28% tax would owe on $80,000. The rules can be complex and there are strategies for reducing what you owe as well as exemptions for surviving spouses, so it’s important to speak to a professional about the best approach for your situation. 

If your recently deceased loved one was a resident of Washington, Oregon, Minnesota, Illinois, Maryland, Vermont, Connecticut, New York, Rhode Island, Massachusetts, Maine, Hawaii and Washington, D.C, their estate will be subject to state estate tax. The tax at a state level applies regardless of whether the federal estate tax applies (a double-whammy for larger estates). 

Like the federal estate tax, there are exemption thresholds and varying rates of tax applicable depending on the value of the estate being transferred. These vary from state to state. To see the exemptions and threshold tables, plus forms and FAQs on localized estate tax, visit the link for each state below:

Six states in the US have a state-level tax on inheritance, which is different to an estate tax. 

Instead of a tax on the estate, as the recipient of an inherited estate, you will be required to file and pay the tax. 

The amount of the tax payable is based on the local state regulation, the relationship between the decedent and the beneficiary, and the value of the property being inherited. If the decedent was a resident of Iowa, Kentucky, Maryland, New Jersey or Pennsylvania, it’s worth getting professional advice on local inheritance tax. 

See the local state websites for more information and 2023 inheritance tax rates:

If you inherit a property or estate in Maryland, be aware that both an estate and inheritance tax apply. 

What happens if you inherit a home from a loved one during their lifetime? If you are fortunate enough to be given a home by someone before their passing, estate and inheritance tax rules won’t apply, but you could be subject to gift tax on transfers of property. The amount of tax is based on the value of the property being transferred. 

This could also apply if you buy a home for less than market value. For example, if your parents sold you a house for $1 or even $500,000 when the market value is worth $1.5million, this would be considered a gift for tax purposes. This tax is designed to stop wealthy individuals from finding loopholes to paying estate taxes by giving property away. 

The annual exclusion amount for gifts in 2023 is just $17,000 per individual ($34,000 for a couple) — significantly less than the estate tax thresholds. 

Tax considerations for inherited properties when the home is sold

If you inherit a property and don’t wish to move in, you may sell it to pay off your own mortgage or focus on other investments. In this instance, if the home appreciates (rises in value) between when you inherited it and when you sell, you will be subject to capital gains tax on the difference. This is because the inherited home is now considered an investment property, even if you haven’t sought to be a real estate investor. 

The key difference between paying capital gains on an investment home that you have bought vs inherited is the way the value of the home is calculated. When you buy a home as an investor, the home’s cost is the basis for which you need to calculate capital gains. If you inherit a home, the home’s cost is not based on the value the original owner paid for it, but on the market value at the date in which they died. 

This is good news for those inheriting a home. The market value will likely be much higher than the original price, reducing your capital gains tax liability.

If the market drops and you sell the home for less than it was valued at when you inherited it, this can be claimed as a loss with no capital gains payable. When you inherit a home, you should arrange for a current appraisal to ensure that the current market conditions and any home improvements are accounted for to to have a record of the fair market value. Tax applicable can also vary if you sell the home within a year of inheriting it, so it’s important to speak to an accountant or tax professional to find out what will be most beneficial in your circumstance. 

The only way to avoid capital gains tax on selling a property you have inherited is to move in and make yourself at home. There are generous tax exemptions for your primary residence, but you must have lived in the home for at least two out of the last five years — so it’s not a short-term option. You will also need to pay state property taxes and local levies for your new home. 

Tax considerations for inherited properties when the home is put on the rental market

If you don’t want to move into the home, selling is not the only option. Rental demand is high in the US in 2023 and you could achieve passive income from the home by putting it on the rental market.

A highlight of Belong reviews by our community members when asked why do they love renting with Belong.

Discover a Love-Filled Post-Property Management World

Renting out your home as a homeowner can be challenging, both in terms of time and emotional strain. Choosing the right people to manage your valuable asset can be overwhelming. Belong offers a unique service that eliminates the traditional landlord-tenant dynamic, making renting a more pleasant experience for both homeowners and residents. We are dedicated to creating a magical renting experience.

We do so by constantly innovating on your behalf, resulting in industry-leading services such as:

Guaranteed rent (regardless of whether or not it’s paid by residents, aligning our incentives).

Financial innovations such as our ‘Split It’ program enable you, the homeowner, to finance any expense and manage cash flow on your terms.

Protection against evictions with up to $15,000 of coverage against legal fees.

A mobile app designed for homeowners and residents to manage their entire renting experience.

Real-time rental market data and interest signals from potential residents to help minimize vacancy and maximize rental value.

Don’t take our word for it, below you will find testimonials from members of our community who love renting with Belong. These stories embody the essence of the care and love that we strive to embody in our work.

See what people have to say about Belong on Zillow, Thumbtack, and on our google profiles in San Mateo, San Francisco, Miami Los Angeles, San Diego, Sacramento, and Oakland!

Belong is building a network; connecting people who own much-loved homes with those who want a place to belong. Together, we can put people first and change what it means to rent homes, leaving a lasting positive impact for generations to come.

You too can play a crucial role in our mission. If you know of homeowners who would love to have their homes managed by Belong, refer them to us and receive $1,000 for each successful referral*. Help us spread the love and be rewarded for your support. This is our heartfelt thank you to those who choose to share Belong with their network.

Join us in shaping the future of renting! We've created an affiliate program for individuals and groups who share our passion for a better rental experience. By spreading the word about Belong, you can help bring homeowners and renters together in a post-property management world that puts people first. Find out more about how you can get involved and make a positive impact in the industry.

Celebrating Belong Reviews in a Post Property Management World

There's a big difference between investing in commercial real estate vs residential real estate, learn what would best suit your portfolio and investment style

Is it Better to Invest in Residential or Commercial Real Estate?

Is it better to invest in a commercial or residential property? The answer isn’t as straightforward as choosing to rent out a business or home. Each type of property investment comes with its own risks, tenancy options, financing and tax implications to consider.

What is “better” ultimately depends on your financial situation and what kind of investments suit your portfolio. In this article, we’ll take a look at the difference between investing in commercial real estate vs residential real estate so you can consider what’s right for you. 

Note: This article is for personal education purposes only. Always speak to a financial advisor or tax professional to get personalized advice for your situation before making any decisions about where to invest your money. 

Investing in commercial vs residential real estate — what’s the difference?

Residential real estate is any property or unit used as a home, such as single-family rentals, condos, or apartments. It requires purchasing (or inheriting) a home and then renting it for monthly income, usually under a lease agreement of around 12 months. This is the preferred type of investment for most individuals because obtaining finance to buy an investment home is fairly straightforward, with a lot less red tape to contend with than commercial finance. Most houses also appreciate well over time and it even gives you the option of returning to the home to live in yourself one day. 

In a recent article, Roofstock reported that single-family rentals (SFRs) have provided nearly identical returns to the stock market — but with far less volatility. This makes owning a rental property an attractive investment option to build or diversify your portfolio. 

Investing in residential real estate might suit you if:

You are new to real estate investing or are looking for a stable, less complex investment type

You want flexibility, with an option to adjust rental prices and sell the home or return to live in it yourself one day 

You want control over your asset, with the option to manage the property yourself or choose a company you trust to work with, such as Belong or a property management company

You want to take advantage of the tax benefits for landlords, such as deductions for expenses and mortgage interest or deferring capital gains

Residential real estate investing is also a great option for people who want to own property, but can’t afford home ownership in the area they want to live. Known as ‘rentvesting’, it involves buying an investment property in a more affordable, up-and-coming area and renting it out, while continuing to rent your primary residence in your preferred location or home type. 

In commercial real estate, the tenants renting from you are using the space to conduct business. The leases are much longer (around 5-10 years is common) and instead of attracting a monthly rate based on how many rooms the property offers, they are typically quoted as a yearly rate based on the square footage available to the business. The workload of managing a commercial property will vary greatly depending on the type of space and leasing business/es. For example the tenants' needs in an office space will differ to a business operating a restaurant or even a hotel, which is a 24/7 business. 

Investing in commercial properties is usually recommended to more experienced investors. This is because the process is complex, it takes a lot of capital, and there are more hoops to jump through to get finance. Commercial real estate is often owned by other corporations or a group of investors, but it is possible for individuals to own commercial real estate for investment purposes.

Investing in commercial real estate might suit you if:

You are an experienced real estate investor looking for a long-term investment option with higher risk and higher reward potential

You are a high-net worth individual or are working with a group of investors, since investing in commercial real estate requires more capital than residential real estate

You can afford the higher maintenance and running costs of operating a commercial property, especially if a change in tenants requires reconfiguring the space

You want to take advantage of tax benefits such as depreciation, mortgage interest deductions, and 1031 exchanges

You have a good team of professionals to guide you through the legalities and regulations of investing in commercial real estate

A popular alternative for individuals interested in commercial real estate is to buy shares in a publicly traded Real Estate Investment Trust (REIT). These companies own, operate or finance the properties to generate income on behalf of investors, so you won’t need the same specialist expertise — but you also won’t own the property or benefit from capital appreciation. 

How investing in residential real estate makes money

Investing in residential real estate can make money in three ways:

Appreciation of the property over time or ‘flipping’ the home after it’s been renovated

Tax deductions and benefits such as depreciation and deductions for mortgage interest and expenses

For most investors, positive cash flow is the goal — owning a home that earns more than it costs to own and operate. How much you earn on a rental after expenses is known as ‘net operating income’ or NOI. This involves taking your gross rental income and subtracting your gross operating expenses and debt liabilities. You can learn more about how to do an accurate cash flow analysis on a rental property here.  

The alternative is negative cash flow on a rental property means that the home doesn’t produce enough cash to cover the cost of the asset. While the name makes it sound, well, negative — this can sometimes be a strategic move. Known as ‘negative gearing’, some real estate investors will take on a property knowing that the rental income won’t cover costs of expenses in the short term. This is because the asset will appreciate and may produce more money in the long term. Negative gearing can also reduce tax liability, with losses claimed against other sources of income.

This is a riskier strategy than positive cash flow, as it requires investing more of your own money for the larger payout in the end. There are also capital gains considerations on the profits if you sell the property without reinvesting the money into another similar home. 

How investing in commercial real estate makes money

If you are a direct investor in commercial real estate — that is, owning the physical property — you can also make money in the same three ways, but on a different scale:

Through annual rent from your commercial tenants, with a steady income on long leasing arrangements

Through appreciation of the property as its value increases over time, delivering capital gains when sold

By reducing your tax liability, as commercial real estate has similar tax benefits to residential such as depreciation, mortgage interest deductions and 1031 exchanges

If you choose to invest in a Real Estate Investment Trust (REIT), the above won’t apply. That is because you will not own any commercial real estate as an individual, nor can you access capital appreciation or tax strategies that real estate ownership attracts.

There are three types of REITs for investors:

Equity REITS: Companies that own and manage real estate, generating income through rent.

Mortgage REITS: Lenders that finance real estate projects through mortgages and loans, generating income from interest.

Hybrid REITS: Companies that offer a mix of both equity and mortgage REITS.

The main benefit of investing in an REIT is that shares remain liquid as they don’t rely on you owning, maintaining and buying/selling a physical property. But that benefit can also be a drawback if you’re looking to take advantage of the benefits of real estate investing. If you invest in property, you can access monthly rental income, you’ll own an appreciating asset that can be sold down the track, and you can take advantage of tax strategies to reduce your tax liability each year.

How Belong is simplifying residential real estate investing

If you’re considering an REIT over investing in real estate because you’re put off by the amount of work it takes to manage and maintain a property, you’re not alone. But there’s also another option to consider: letting Belong take care of everything.

Belong wants to bring residential real estate investment back into the hands of individual investors, helping homeowners to achieve financial freedom. We do this by making the process of managing a rental home and achieving passive income much easier, where homeowners don’t have to lift a finger. Our homeowners even get asset management advice, helping to optimize your investments and get the highest ROI. 

So whether you’re ready to try your hand at investing in residential real estate or are looking for better ways to optimize your rental’s cash flow, learn more about Belong’s new approach  and see if your home is eligible here.

When should you get a property manager for your rental home? Learn about what to consider, common complaints about property management, and the alternatives.

Do You Really Need a Property Manager For Your Rental Home?

Managing a rental home yourself is no picnic. While there are plenty of people who can and do self-manage their homes on the rental market, it’s a challenging and time consuming job that many would prefer to outsource to a professional. 

So when should you look at getting a property manager — and what are the alternatives?

4 considerations for hiring a property manager

If you don’t like the idea of self-screening tenants or chasing down rent, hiring a professional property management company is a good idea. Here are five key considerations for homeowners who may need help managing their home on the rental market:

Self-managing a property from a distance is harder than if you live locally. A property manager can handle the day-to-day responsibilities on your behalf and provide regular updates and reports. 

If you have a busy schedule and don't have the time to devote to managing your rental property, a property manager can take on the responsibilities and free up your time. If your portfolio grows and you own more than one home on the rental market, the workload will grow too. A property manager can help you streamline the process and manage one or more properties efficiently.

If you are new to being a ‘landlord’ and are unsure about the responsibilities and regulations involved, a property manager can provide the expertise and experience to ensure everything is done properly.

High tenant turnover can be a sign that your property is not being managed effectively. A property manager can help you reduce turnover by finding and retaining high-quality tenants.

In theory, hiring a property management company can bring peace of mind to homeowners, knowing that everything is taken care of. From advertising and marketing the property, screening potential tenants, negotiating lease agreements, collecting rent, and handling maintenance and repair issues — they have it covered. 

But having a property management company on the books is no guarantee that any of these things will take place either. 

5 common complaints about traditional property management companies

The property management industry is extremely large and fractured — the quality of businesses and professionals you can work with varies wildly. Common complaints of traditional property management companies include:

You can only get hold of property managers during business hours and phone calls and emails go unanswered for lengthy periods. 

You sign up to pay a percentage of your monthly rental income, but find that your actual income check is considerably lower once all the additional fees come out for things like tenant communication, inspections, marketing, renewing leases and more.

Some traditional property management companies will suggest high rental prices to get homeowners excited about potential earnings, only to price renters out of the market and have high vacancy rates. Some will also continue to charge fees even when the home is empty, further eroding your investment earnings. 

Keeping high quality residents in your home is a priority for keeping your home profitable and well-maintained, but for some reason it’s commonplace for PMCs to treat requests as a nuisance. 

5. Costly rental recuperation and evictions

If the worst happens and the residents stop paying rent or breach their lease conditions and need to be evicted, a good property management company would step in and assist. The reality is, many continue to charge fees even when rent isn’t being paid and charge for the extra communication to serve notices about breaches. Even PMCs that offer eviction protection will typically only cover the issuing of the legal notice, capped around $500.   

What’s the alternative to a traditional property management company for rental homes?

If you’ve been burned by a bad property management company or are reconsidering your options, there are three alternatives for your home:

Hire your own staff or person to manage the home on your behalf

Opt for a modern-day alternative like Belong

If you’ve determined that you need property management, but aren’t sold on hiring a property management company there are options. You can build your own team, or you can opt for an alternative such as Belong — who is ditching the broken property management model to offer a better rental experience for both homeowners and their residents. 

6 ways Belong is different to a traditional property management company

Those common complaints that homeowners have about their property managers? Not an issue with Belong. As the world’s first residential network, we make renting lovable, by fixing what’s broken with:

1. We’re available any time of day or night

Belong homeowners and residents both get access to 24/7 support, with a dedicated concierge service available through the Belong app. 

2. We don’t hide fees or upcharge for essentials

No hidden costs for the essentials such as marketing and tenant communication, just transparent and reliable billing.  

3. We provide outstanding service to residents

Belong residents are considered to be members of our community, like homeowners. We reward them for paying rent on time and help them feel at home, so they stay for longer. We can even assist with rental insurance products, protecting both them and your home. 

4. More of our residents renew their lease

71% of our happy residents renew their 12-month lease, reducing the time between tenants in your home. With low vacancy rates and long-term residents, there’s less disruption to your rental income (and we don’t charge during vacancies, either). 

5. We guarantee rent and provide eviction coverage

Never get caught short, with guaranteed rent paid to you every month — regardless of when your residents pay. And with up to $15,000 coverage on evictions, you won’t be caught off guard in the event that we place a resident that breaches the terms of their lease. 

6. We have innovative finance options and perks for homeowners

Spread the cost of maintenance and repair work over the term of your lease with our exclusive finance options for homeowners. It’s just one of the many flexible financing options and innovative services on offer.

When should you get a property manager for your rental home? Learn about what to consider, the common complaints about property management and the alternatives.

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.

Most landlords want positive cash flow, but to do an accurate rental property cash flow analysis, you’ll need a spreadsheet and these important calculations.

How To Do An Accurate Rental Property Cash Flow Analysis

Calculating cash flow on a rental property isn’t quite as simple as the amount you earn in rental income. Nor is it as straightforward as rental income, less your mortgage repayments. To do an accurate rental property cash flow analysis, you’re going to need a spreadsheet and the following information.

What is positive cash flow on a rental property?

When your rental home makes more money than it costs to run, you have positive cash flow. This can also be referred to as passive income — money that comes from an investment rather than you actively working for it, as you would in regular employment. When you have low mortgage repayments (from low interest rates or high equity in the home) on a home that is in good repair, it’s easier to maintain positive cash flow.

Keeping your cash flow as high as possible is the goal for most homeowners with 1-2 rental properties, contributing towards financial stability and ensuring there are enough funds to cover any unexpected expenses that may arise. 

What is negative cash flow on a rental property?

Negative cash flow on a rental property means that the home doesn’t produce enough cash to cover the cost of the asset. While the name makes it sound, well, negative — this can sometimes be a strategic move. 

Known as ‘negative gearing’, some real estate investors will take on a property knowing that the rental income won’t cover costs of expenses in the short term. This is because the asset will appreciate and may produce more money in the long term. Negative gearing can also reduce tax liability, with losses claimed against other sources of income.

How do I calculate my rental home’s cash flow?

To determine if your home is achieving positive or negative cash flow, you need to do an accurate rental property cash flow analysis. This involves calculating the net operating income of the property, less any debt service. To work out these formulas accurately, here is the breakdown of income and costs to account for. 

1. Determine the total gross income of your rental property

First, comes the easy part. Take a look at all sources of income relevant to your rental home and determine your gross cash flow on the property. 

This should be pretty straightforward — your rental income. If you self-manage the home and charge for any extras such as furniture rental, storage or services, include this too. 

For example, if you charge $2,000 per month for rent, your gross income for the year would be $24,000. If it’s $3,000, it would be $36,000 per annum. 

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