Explore what to do with an investment property that’s negative cashflow.

Your Investment Property Is Negative Cash Flow. Should You Hold or Sell?

What to do with an investment property that’s negative cashflow.

Is your rental property starting to feel more like an expense than a lucrative investment? Maybe your rental home is barely breaking even, and you’re not able to cover your costs in rent. You might even be losing hundreds of dollars a month, struggling to keep up with mortgage, property tax, and maintenance bills you can’t afford. 

What should you do? Do you hold onto the property, or sell right away? 

At first, this question might sound counterintuitive. Why would anyone hold a negative cashflow asset? Isn’t the whole point of an investment to make money? 

Well, yes — and often, that does mean selling is the right thing to do. But property is a little different from other types of investments. There are situations where holding a negative cashflow property can be the right decision, but it depends on many different factors. 

Today, let’s explore why your home could be negative cashflow, strategies to get it profitable again, and reasons you might choose to hold or sell. 

First of all, let’s clarify why you’re losing money on the property. 



There are many possible reasons your property could be cashflow negative. But generally, this situation arises either by accident, or as a strategic, calculated decision. 

You might be surprised to learn that many people buy property knowing it won’t turn a profit — at least not right away. 

This is a common property investment strategy called negative gearing. When owners buy a property they know won’t cover its own costs, they’re betting that eventually, the home will rise in value enough to turn a profit. That could happen by commanding a higher rent, or from the proceeds of a sale. 

Obviously, negative gearing is a higher-risk investment strategy than buying a profitable home. But that doesn’t mean it’s never a wise decision. 

Negative gearing is more common in super-hot housing markets, like large urban centers. In these settings, prices might be high and down payments low — but buyers can be more certain that their home’s value will continue to rise. 

The costs associated with the property might reduce the owner’s total tax burden, because they’re counted against other income. 

However, often the owner of a negative cashflow property did not plan for their situation. They were seeking out another income stream, only to find themselves losing money. 

Property investing is complex — it’s easy for buyers, especially novices, to overestimate how much they’ll be able to earn. Plus, homeownership is full of unexpected expenses that can eat into cashflow. 

Investors might not realize how expensive repairs and maintenance can be. They might be out of touch with market rents in their area, leading them to lose money on a rent that’s too low, or on a vacancy, if they set it unrealistically high.   

When buying a rental property, buyers can’t just assume that they’ll make money by renting out their home. They need to run the number and do an actual analysis, ideally with a property accountant and an expert on their local market. 

Losing money on an investment is scary. But a negative cashflow property isn’t the end of the world. 

If you want to get your property out of the red, first you need to analyze where your income and expenses stand now. Then you have two options — reduce what you’re spending on the property, or find ways to charge more. 

No matter what, start by performing (or revisiting) your comprehensive cashflow analysis. 

You can’t make your home profitable until you actually understand what you’re currently spending, and what the realities of your local rental market might allow you to charge. That includes the cost of holding the property right now, and a nuanced understanding of your local market. 

If you didn’t complete a cashflow analysis when buying your home, now is the time to contact an accountant and get started. If you did run the numbers, but you’re still losing money, come back to the analysis with expert assistance to identify where the problem is. 

Owning a property comes with three major kinds of expenses — property tax, your mortgage payment, and maintenance or repairs. Here are a few ways to get the monthly cost of each down. 

Reduce maintenance fees by finding reliable, better-priced contractors. Or, try finding a management company (or modern alternative like Belong) that can do so for you 


Make sure you’re taking advantage of tax breaks to reduce what you owe. Work with your accountant to audit and optimize how you file taxes


If possible, renegotiate your mortgage. For example, maybe interest rates are down, or a longer tenure could reduce your costs 

After reducing costs, look at ways to increase what you can charge for your property. Here are a few ideas.

If your cashflow analysis revealed that you’re charging below market, raise what you charge in rent 


If there’s demand for short-term rentals in your area, try listing on a site like Airbnb instead of looking for long-term residents 


Raise the value of your home by renovating. This could allow you to charge at the higher end of your local market rate 


Rent out any spaces, like a parking spot or a garage that current tenants aren’t using

Holding a negative cashflow property only makes sense if you believe the home will become profitable — and you can afford to hold it until it does. Deciding if negative gearing is right for you means assessing both your personal financial situation, and the realities of your home and market. Just like so many other choices in property investing, it’s a highly individual choice with no hard-and-fast rules. 

Maybe your personal circumstances have changed, such as through a job loss or unforeseen expenses. If you can’t afford the extra costs on the property, it doesn’t matter whether or not they could pay off in the end. 

Or maybe the property itself has issues you can’t fix. If the home is in an undesirable location, a weak rental market, or has serious maintenance-related problems, it could be that no amount of waiting or renovation will make it profitable.

Only you can decide when owning a negative cashflow property isn’t working — but we still recommend taking advantage of some expert advice. If you need some guidance on how to manage your rental home, reach out and book a consultation with us at Belong. 

From hold or sell to making profit-friendly changes, explore what to do with an investment property that’s negative cashflow.

Understand how to purchase an REO foreclosure property and what makes them different from other real estate investment opportunities. 

What is an REO Foreclosure?

An REO Foreclosure is a real estate-owned property that failed to sell during foreclosure. The mortgage lender, bank, or mortgage investor owns the property, and these types of properties are sometimes also called “bank-owned” homes. REO foreclosures offer buyers another avenue to acquire real estate. 

Still, as with all investments, it’s critical to understand precisely how to purchase an REO property and know what makes them different from other real estate opportunities. 

For a house to become an REO property, the home must go through several steps. In the pre-foreclosure stage, a homeowner will default on their mortgage. If the homeowner and mortgage lender cannot agree on an option to allow the homeowner to remain in the home (sell via a short sale or return the deed to the lender/investor), the property enters the foreclosure process.

A foreclosure sale is scheduled, and the home is listed for a specific price. If the property does not sell, the lender or the investor will take over property management.

If the property does not sell at foreclosure, the home becomes an REO (real estate owned) property. A house may also become REO property if the previous owners moved out or passed away at the end of a reverse mortgage. If their heirs won’t or don’t want to pay off the mortgage, refinance or sell the property, they can return the property to the lender or investor, and it will become an REO property. 

REO properties are typically categorized as distressed and always sold “as-is.” Remember that these properties are foreclosed when the owner cannot pay their mortgage. As a result, it’s unlikely that REO properties will be well-kept. If the previous owner did not have money for the mortgage, it’s doubtful they kept up with much maintenance. There is also little incentive to keep a home in good condition if you know it is being foreclosed. You will find that REO properties are frequently discounted to sell quickly, which can provide real estate investors with a unique opportunity. 

Pros and cons of purchasing an REO property 

REO properties are a less common way to purchase a real estate investment. As such, they come with distinct pros and cons. Understanding the potential benefits and pitfalls will allow you to decide if buying an REO property is right for you. 

Price is the most significant benefit of purchasing an REO property. The initial listing price of REO properties is often below the current market value, and investors will find that banks are often willing to negotiate the sale of these properties. Purchasing an REO property also offers a buyer protection from outstanding property taxes. There are no outstanding taxes on REO properties, which can be preferable to buying a tax foreclosure home because the new owner would inherit the tax bill. 

REO properties are sold “as-is,” meaning they can have expensive repairs that will likely exceed the standard 1% – 3% of the home value. If you carefully inspect the property and estimate repairs, REO properties can still offer an upside. 

Those interested in purchasing a multi-unit REO property should familiarize themselves with the Protecting Tenants at Foreclosure Act which requires giving the tenants 90 days’ notice. You may be required to honor the terms of the existing lease. 

REO properties can also come with additional costs, including attorney fees and the cost of securing the property. Depending on the market, there can also be a lot of competition for these types of properties. 

You can start your search for REO property listings by using publicly available lists from the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs, the Department of Agriculture, and the IRS. Fannie Mae and Freddie Mac provide an aggregate list of REO properties. 

If you are interested in purchasing an REO property, you’ll want to find a real estate agent with this type of property experience. They have a better understanding of how to structure a suitable offer. The right real estate agent will also have good insight into what repairs or changes will be needed for each property. Finding a lender to provide the appropriate financing for an REO property is also critical. Finally, you may need to identify an attorney with REO property experience. 

Once you have identified the best professionals and a suitable REO property, you must submit an offer. Through this process, you will have the opportunity to inspect the property and get an appraisal, which is highly encouraged in purchasing an REO property. The seller is unlikely to pay for an inspection and will not fix anything identified in the inspection report, but having a professional inspection will ensure you have all the information needed to make an informed decision and offer. 

General vs. special warranty deeds for REO properties 

When purchasing an REO property, you will receive a general or special warranty deed. Understanding the difference between the two is essential to protecting your new asset. 

With a general deed, no one can claim issues with your title from before you owned the property. A general deed also indicates that there are no liens and that the property is owned free and clear by the seller.

With the sale of an REO property, you are more likely to receive a special warranty deed. This deed only guarantees that no additional title issues have been created since the bank or investor took over ownership. While the bank or investor has the right to sell the property, there’s no promise against other pre-existing title issues or liens. If you have a special warranty deed, an owner’s title policy can help protect against any pre-existing property claims.

Once you’ve purchased your real estate investment property, consider Belong 

Belong is a new alternative to old-school, expensive property management. We use data and real-time insights to price your property and find your new residents. We help you get your new real estate investment ready for the residents of your dreams. With Belong, you’ll have access to 24/7 customer service and a team of full-time maintenance professionals, who can even assist with renovations and strategic financial decisions on your new investment. 

Once you’ve purchased your new real estate investment, we invite you to explore working with Belong for the smoothest process, guaranteed rent, and concierge-level support. Learn more about Belong for Homeowners.

Predicting the annual cost of home maintenance on your rental property will allow you to plan for expenses and ensure that there are fewer surprises in store.

How to Predict a Property’s Annual Cost of Maintenance

Predicting the annual cost of home maintenance will allow you to plan for expenses and ensure that there are fewer surprises in the future. Maintenance is critical because it prevents more expensive repairs and replacements down the line. 

If you are unfamiliar with your property, you should begin by inspecting any major appliances and house systems, including your heating and cooling units, insulation, roof, and hot water heater. It’s also helpful to understand the current state of your electrical, water, and sewer systems. If you recently purchased the property and had a professional inspection, you can find much of this information in their report.

Factors that impact the annual cost of maintenance

Your annual maintenance costs will vary depending on the current age and condition of the property. It’s common for a single-family home to require more maintenance than a condo or apartment that may have an HOA. In some cases, the HOA may be responsible for some maintenance. If this is the case, be sure you are familiar with any fees or costs associated with their maintenance. 

The location of your rental property will also impact the annual maintenance cost. You can expect more maintenance for homes in very cold climates (consistently below 20 degrees) or if you receive significant snowfall. Similarly, homes in humid climates or areas that receive lots of rain will likely need additional maintenance to combat mold and mildew. Frequent rain can also impact the roof and require more frequent siding repair or tree removal.

Carefully consider all of these factors as you calculate annual maintenance costs and plan for expenses. 

The Annual Maintenance Checklist for Rental Homes in California

The Annual Maintenance Checklist for Rental Homes in Florida

The Annual Maintenance Checklist for Rental Homes in Washington State

How to estimate rental property maintenance

Several calculations can help homeowners predict their maintenance costs. Keep in mind that these formulas should be used only as an estimate.

The 50% maintenance rule suggests that homeowners should allocate half of their rental income, or mortgage, for repairs, maintenance, taxes, and insurance. If you already know your tax and insurance costs, you can quickly determine what remaining amount to attribute to maintenance costs. We recommend using this calculation against one of the other formulas to verify your estimate.  

You can also use the square footage of your home as an indicator of your annual maintenance costs. If you use this rule, you should start by estimating $1 per square foot for yearly maintenance costs. If you have a 2,000-square-foot house, your annual maintenance estimate would be $2,000. This estimate may not include yard maintenance, tree removal or care, or snow removal. Likewise, this rule does not account for significant repairs that may be needed. 

If you use the 1% maintenance rule, you will plan that maintenance costs for the year will equal 1% of the property value. For example, if your home is valued at $500,000, your annual maintenance costs will be $5,000. If you use the 1% rule to estimate your maintenance expenses, keep in mind that it does not include any major repairs or replacements. 

The 1% rule can be a helpful maintenance cost indicator because as home values increase and inflation continues to rise, you can expect maintenance costs to increase. While we’ve been using the 1% rule for some time, it’s wise to consider saving closer to 2-5% of your property value, depending on your property’s age, condition, and location. 

Average costs of common rental property maintenance

To accurately predict your annual maintenance cost, you should use a combination of calculations. Consider using a formula and comparing it against the actual costs of routine maintenance. 

Routine maintenance costs (every few weeks or months)

Routine maintenance costs should include any expenses you expect to incur on a regular or semi-regular basis. Keep in mind that some maintenance may only be seasonal. You may need to plan for yard maintenance in the summer and snow removal in the winter. 

You should expect homes to require minor repairs on a semi-regular basis. Things break, and you’ll be less frustrated if you have planned for these repairs, even if you can’t plan which things might need repairs. If you can make these minor repairs yourself, you’ll likely save money on annual maintenance. Likewise, a responsive, reliable handyperson can save you many headaches and additional costs. 

Leaky faucets or toilets: $150-$400/each 

Appliance repairs - washer/dryer, refrigerator: $100-$400/each 

Major maintenance and replacement costs 

Major repairs and maintenance costs can be extremely expensive and cause homeowners significant difficulty. Almost all homeowners will experience a considerable maintenance cost at some point. However, if you assess the current state of your home systems and appliances, you’ll better understand which expenses might arise in the future. As you evaluate your home, you can keep these costs under consideration. 

Sewer line or septic tank replacements: $5,000-$15,000

After you’ve evaluated the current condition of your home, you can plan for additional expenses that are likely to occur in the future. For example, if your hot water heater is ten years old, it’s prudent to begin setting aside money for a replacement. 

Every system in your home has an expected life expectancy. With regular maintenance, you can extend the life of these systems. However, these things will ultimately need to be repaired or replaced. You can expect the exterior paint on a home to last anywhere from four to six years. HVAC systems can last 10-20 years, depending on the climate. The AC may need to be replaced sooner in warmer climates where the system runs more frequently. A traditional water heater has a lifespan of 8-12 years, and a tankless water heater will last 20-25 years. 

The roof of your home is one of the most expensive items to replace. Each type of roof will last for a different duration. It’s critical to familiarize yourself with the kind of roof you have and its current condition. Roofs will generally remain in good condition for 12-25 years. 

Many of us are now spending more time at home, and many may still work from home, either part-time or full-time. As a result, you can expect more wear and tear on a home. 

Property management and asset management play distinct roles in real estate. Find out how successful real estate investors use both to maximize their returns.

Asset Management vs Property Management (and Why You Really Need Both)

The most successful real estate investors don’t go it alone — their wealth is driven by the support of both an asset manager and property manager to maximize income and make strategic decisions on their investments. In this article, we discuss what the difference is between asset management and property management, and how Belong is taking the best from both worlds to create a new service that makes this help more accessible to the everyday rental home investor. 

When it comes to maximizing the income and value of real estate investments on the rental market, asset managers and property managers play two very distinct roles. 

Property management generally describes anyone who manages the physical, day-to-day operation of a home. Services like marketing and listing a home on the rental market, vetting tenants, issuing the lease agreement, collecting rent, and inspecting the property. 

Asset management refers to a professional who gives advice on strategic and financial decisions for the asset, helping to optimize management to suit the owner’s financial goals. For example, this could include cash-flow maximization, tax strategies, or optimizing for long-term equity. They also monitor the performance of the home as a real estate investment and can help determine when it’s the best time to acquire, hold onto, or sell a property in a specific local market.  

Is there a need for both asset management and property management?

While you can certainly get away with just one of these services (or even none, if you take on self-management yourself), there are huge benefits to having help in managing your property as both a financial asset and rental home. 

Property management is an obvious choice for rental property investors. If the property is well-maintained and cared for by quality, trustworthy residents you can retain the home’s value and minimize vacancy periods. 

But when it comes to maximizing the returns on your investment, homeowners who use a real estate asset manager can realize higher profits and stronger portfolio growth. 

This is because asset managers are finance professionals that keep a close eye on ever-evolving market trends. With a solid understanding of the economic climate and latest predictions, they can help homeowners to stay responsive, acting fast to mitigate risk and capitalize on opportunities. 

This is different to getting broad financial advice too. Your home is not the same as the next investor’s and your financial objectives are unique to your personal situation. A good real estate asset manager can take your goals and circumstances into account, providing guidance on what can benefit you and your family specifically. 

Even if you’re an ‘accidental investor’ and have inherited your home, an asset manager can take a practical approach and examine all angles to determine how best to manage financial decisions on what to do with the property. 

Belong looks after your property as both an asset and a home

If you partner with Belong you will have all the benefits of a property manager and asset manager — plus a whole lot more. Belong isn’t a property management company, but a complete residential network and service that goes above and beyond for homeowners and their residents. 

These unexpected perks (that you won’t get from a traditional property manager) include having a highly qualified asset manager on staff. 

Our experienced asset manager has managed over a billion dollars in real estate assets on behalf of institutional clients — a service now available to everyday rental property investors who partner with Belong. With in-house asset management, Belong homeowners can run the numbers on their own property (or properties) and get expert assistance navigating strategic decisions to meet personal financial goals. 

And because you can also access Belong’s dedicated team of real estate and maintenance professionals, your home will always attract the best price and the best residents when it’s on the rental market. 

Discover the difference between Belong vs property management

Asset management is just one of the many ways Belong is eclipsing the old-school property management model. Our homeowners also enjoy a unique hospitality experience that includes guaranteed rent, a 24/7 concierge service, access to employed tradespeople, and 66% less vacancy. All without hidden property management fees and scary markups. 

Learn more and find out if your home is eligible at belong.com/homeowners.

Understand how capitalization rates (or cap rates) are calculated to identify the best methods for assessing a potential rental property investment.

Capitalization Rate: What It Is and How To Calculate It

The capitalization rate is one of many ways to evaluate a potential investment property. Still, it’s critical to understand how capitalization or cap rates are calculated and their limitations. With a better understanding of calculations like cap rates, you can identify the best methods for assessing a potential rental property. 

Capitalization rates compare and estimate the future return on investment or ROI of one or more real estate properties. Cap rates for residential and commercial real estate are expressed as a percentage. They’re a popular tool because they help individuals estimate the potential return on real estate investments. 

Capitalization rates measure the potential yield of a specific real estate property over one year, assuming that the property is not financed. You can also think of cap rates as the percentage rate of return, either a loss or gain, of a specific property based on the income it generates, minus expenses. 

How do you calculate the capitalization rate of a property? There are two methods or formulas that are used to calculate capitalization rates. 

Most real estate investors will use the calculation which divides the net operating income by the property’s current market value. This calculation can be expressed using this formula:

Capitalization Rate = Net Operating Income / Current Market Value

In this calculation, the net operating income equals the estimated annual income minus expenses like maintenance, property management, and property taxes. This formula is most popular because it compares the projected income of a property against the current market value. 

The second formula used to calculate capitalization rates differs because it compares net operating income against the property’s purchase price. 

Capitalization Rate = Net Operating Income / Purchase Price

This formula puts more emphasis on the acquisition cost of a specific property, as opposed to the current value of a property. While there is no drawback to using this formula at the time of purchase, it’s not ideal for properties purchased months or years prior. Using the purchase price from several months or years ago will incorrectly estimate a property’s potential return. Similarly, this formula works poorly for homes that have been inherited because the purchase price is zero. As a result, using this formula can result in unrealistic expectations. 

To estimate the net operating income of a property, you will need to calculate the annual rent by multiplying the monthly rent by twelve. Once you have calculated the annual rent, you will need to subtract expenses. Expenses should include taxes, utilities (if not paid by the resident), property and liability insurance, and maintenance. 

If you are unsure of the monthly rent, we recommend that you research similar properties in the same area. You’ll need to look for other properties that have similar amenities. Identifying several similar properties will help you accurately estimate your monthly rent for a property. 

Why don’t the capitalization rate formulas account for financing 

Capitalization rates do not account for property acquisition costs like interest and closing costs for a very specific reason. The cost of acquiring a property will vary significantly depending on current interest rates, type of loan, and your particular closing costs. While other formulas can account for these costs, capitalization rates are designed to provide a baseline rate of return, regardless of loan repayment or interest rates. Excluding acquisition costs ensures that investors compare potential properties based on possible returns without factoring in highly variable costs unique to each individual. 

When you shouldn’t use capitalization rates to assess real estate properties 

You should not use capitalization rates to evaluate a property if you plan to use the property as a vacation or short-term rental. The potential income, occupancy, and expenses are too variable to assess a property accurately. 

While capitalization rates are a helpful tool, they have limitations that can be illustrated using two hypothetical properties. Let’s imagine that the first property has a net operating income of $50,000 and the current market value of the property is $600,000. In this example, the capitalization rate is 8%. 

Property #1 = ($50,000 / $600,000) x 100% = 8%

In the second example, a property has a net operating income of $40,000 and is currently valued at $400,000. The capitalization rate for this property is 10%. 

Property #2 = ($40,000 / $400,000) x 100% = 10%

If you only consider capitalization rates, the second property is the better investment. However, each investment opportunity has unique characteristics that should be considered. While the second property has a better capitalization rate on paper, it could be located in a less desirable location or have fewer amenities. As a result, the first property might be a better investment, even if it has a lower cap rate. 

How to use capitalization rates to your benefit 

Capitalization rates are one tool for gathering information and comparing potential rental properties. Individuals can identify the best investment for their financial picture and goals with more details. 

When calculated correctly, capitalization rates can indicate the length of time needed to recover the amount invested into the property. For example, a cap rate of 10% will require around ten years to recover the amount invested in the property. 

Understanding what constitutes a ‘good’ cap rate

It may be tempting to look for a potential investment property with “good cap rates.” However, it’s essential to understand that capitalization rates are not evaluated as good or bad but rather as an expression of potential risk.

A higher capitalization rate corresponds to more risk, and a lower cap rate is associated with less risk. Your ideal cap rate will depend on how much risk you’re comfortable taking. Generally, capitalization rates will fall somewhere between 4% and 10%.

You should assess capitalization rates in the context of the specific property and the current real estate market. As a general rule, you can expect capitalization rates to increase whenever interest rates rise. An increase in interest and capitalization rates will significantly impact anyone who owns a rental property. 

All things being equal, a lower cap rate equates to a better valuation and a better prospect of returns with less risk. Conversely, a higher cap rate will likely result in a relatively lower ROI and a higher level of risk. 

In real estate, properties are rarely equal. One property may generate more rental income but has more maintenance costs and higher taxes. Ideally, you want to identify a property with a reasonable cap rate relative to the amount of risk in purchasing a specific property.

How Belong supports the success of your real estate investments

A successful real estate investment strategy requires you to identify the ideal property, maintain a positive cash flow, and manage the investment effectively. Belong helps homeowners increase their profits and limit the hassles of owning an investment property.

When it’s time to price your property, Belong uses data and real-time insights to help you maximize cash flow. We also offer guaranteed rent, which means you never worry about less than 100% occupancy, which helps keep your investment safe. 

Learn more about Belong and see its role in your real estate investment strategy.

Understand how cap rates are calculated to identify the best methods for assessing a potential rental property investment.

Find out how to manage a break-lease without losing rental income on your home.

How to Manage an Early Lease Termination

When you have a 12-month lease agreement in place, it’s safe to assume that your residents are staying put for at least a year. But in spite of their best intentions, life sometimes gets in the way and your residents will ask to leave early. Typically, under most contracts they will be on the hook for rent for the remainder of the agreement — but like most things, it’s not all black and white. Here’s how to manage an early lease termination without losing rental income. 

Just as a lease agreement is an essential part of renting out your home, so too is a policy on early termination of the agreement. If you don’t have a termination clause in place, you could be caught out if your residents want to leave earlier than planned. 

If you’re self-managing a rental property, you will want to ensure you have an up-to-date lease agreement that abides by your local state laws and includes a policy for lease termination. A formal lease agreement protects you from losses in the instance of a break-lease by ensuring that your residents remain financially responsible until the property is relet. You will need to either speak to an attorney or anyone you partner with to help manage your property, like Belong or a property management company. 

Regardless of how your property is managed, the residents will need to provide written notice to vacate. They also need to follow the procedures outlined in their signed lease agreement, such as continuing to pay for rent during any vacancy and covering marketing costs. 

As the homeowner, once you have been served notice for a break-lease, you must be seen to take reasonable steps to find a new tenant. That is, you can’t simply wait out the lease agreement while the former resident is still paying rent. The property must be marketed for rent in an effort to find new residents — either by you or whomever is managing the property. 

There are a few instances where these financial penalties don’t apply and only 30-days written notice is required, such as if the resident is called for active military duty or needs to leave to protect themselves from a domestic violence situation. 

4 reasons a tenant has a legal right to break a lease

There are some exceptions under state laws that allow a tenant to terminate a lease agreement early without the same penalties. Check with your local jurisdiction, but for example here are the legal reasons within California where a tenant can end an agreement early:

1. The resident is a victim of domestic violence

In many states (including California and Washington), a victim of domestic violence can provide 30 days written notice to vacate and end their lease early without having to pay rent for the remainder of the agreement. Typically they will need to provide proof of this status (such as a protective order). 

Even if your state laws do not enforce this, it is worth having compassion in these scenarios and consider the safety of your residents. Not allowing them to leave without a financial penalty could force them into an unsafe situation. Not only is this inhumane, there is a real potential for damage to your property or lawsuits if the situation were to escalate. 

2. The resident has been called to start active military duty 

If your resident is part of uniformed services (armed forces, National Guard, NOAA or commissioned corps of the Public Health Service) the War and National Defense Service members Civil Relief Act gives them the right to break a lease under federal law.  

They must still provide you with written notice of their intent to break the lease for military reasons and their tenancy will terminate 30 days after the date that rent is next due, even if it’s prior to their lease expiration. 

3. You have not provided a habitable living space

As the owner, you have a responsibility to your resident to provide a safe and habitable space to enjoy as their home. This isn’t just a nice thing to do, it’s a legal requirement known as “warranty of habitability” that applies to all residential leases. 

If there are issues in the home that violate this right (for example, structural issues or a lack of hot water and heat in winter) and you don’t take measures to rectify it, your resident can leave without being held responsible for further rent. Bear in mind that this is only for serious violations and there is a process that needs to be followed, a resident couldn’t simply move out because their shower stopped working without giving you a reasonable time to respond. 

If your home is with Belong, you never need to worry about habitability. This is because we have an extensive network of vetted maintenance professionals and all residents in our network have access to a 24/7 concierge service, ensuring nothing slips through any troublesome, leaky cracks. 

4. You harass the resident or violate their right to privacy 

State laws vary, but typically you will need to give reasonable notice (around 24 - 48 hours or more) before entering your home while it’s being rented out. If you fail to abide by this or are seen to be harassing the resident in any way (such as turning off utilities, changing locks, or showing up unannounced), they have a right to terminate the lease without penalty. Depending on the nature of the violation, you could also face legal action and your own financial penalty. 

If your home is with Belong, again we handle all communication with residents and abide by local state laws regarding inspections and notices, ensuring that overstepping the mark is never a concern for our homeowners. 

How Belong handles early lease termination on your behalf

When your home is loved with Belong, we will manage all communication with both the former and new residents on your behalf and make sure you’re not left out of pocket in the process. 

When a resident requests to terminate their lease early, they remain responsible for paying the rent until the end of their agreement or until another resident has been placed to take on a new 12-month lease. This means there’s no gap in your cash flow and you can continue to earn guaranteed rent even when a resident needs to leave early. 

When the exiting residents move out, we take care of prepping your home to go back on the rental market, with any repairs and/or cleaning costs deducted from the security deposit. In the case of early lease termination, the resident will also be responsible for the placement fee that homeowners usually pay when marketing their home to new residents. 

Of course, the real estate market is a fickle beast and prices can fluctuate wildly due to changing market conditions. If the rental market value of your home has gone down and we need to consider a price adjustment to attract interest from new residents, any difference in rent will need to be covered by the former residents until the expiry date of their original lease agreement. 

Find out why Belong is the stress-free alternative to property management		

When the unexpected happens, you’ll really notice the difference between Belong and a traditional property management company. From 24/7 concierge support for both you and your residents to guaranteed rent and protection against eviction costs, Belong is making renting lovable for everyone. 

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.

Sometimes tenants want to terminate their lease agreement early. If you own a rental property, find out how to manage a break-lease without losing rental income

We asked our resident Asset Manager, Jon Martin, to weigh in on the topic of acquiring rental property in 2022

Is Now a Good Time To Be Acquiring a Rental Property?

You asked, we answered. During our recent webinar conversation on rising interest rates and its impact on the American housing market, homeowners asked us “Is now a good time to buy a rental property?”. And if you have already acquired or inherited a home eligible for the rental market, should you hang onto it or sell? 

There are a lot of mixed messages out in the housing market right now, with many economists torn on whether we’re in for a crash in prices as interest rates and inflation shoot up. 

To help those who are thinking about buying a home for the rental market, we asked our resident Asset Manager, Jon Martin from JDM Asset Management, to weigh in on the topic.

Is now a good time to buy a rental property in the US?

What is tough news for many Americans grappling with inflation, can be positive for rental property owners, with the hot rental market likely to intensify further. 

“At higher interest rates, fewer prospective homebuyers will qualify for mortgages (or at a lesser dollar amount) and will instead choose to keep renting. Rising rental demand will further push rents up – we’re actually already seeing that, with median nationwide rent passing $2,000 for the first time ever in May,” explains Jon. 

If you are looking at acquiring a property for rent, Jon notes that now is a good time to keep a watchful eye for opportunities and price-drops in your desired neighborhoods, as less competition provides some welcome relief to house hunters. 

“While you’ll have to factor in a higher cost of capital when analyzing your next opportunity, the recent upward pressures on rents and the likelihood of locating an attractive single family rental are creating a more attractive market for acquisitions,” says Jon. 

“Another point to consider when looking to acquire a rental, for those sitting on cash, is a higher down payment than say the standard 20% to reduce your exposure to higher interest rates,” he adds. “This will only help when running the numbers to see if your rental income will cover your operating expenses and mortgage payments,” says Jon. 

Watch now: Catch the full webinar conversation here.

Tax advantages of holding rental property 

Jon also reminds homeowners that in addition to favorable rental pricing in the current market, there are also tax advantages to holding rental property. 

“You have the ability to depreciate the physical structure of the home and the cost of any property improvements, along with deducting most expenses related to operating a rental. So all in all, the picture can still look quite good for the acquisition of rental homes,” Jon explains. 

Learn more: Tax Strategies for Rental Investors: 5 Ways To Make A Home Less Taxing

Should I sell my home or put it on the rental market?

If you have (or have recently acquired) a property, the next logical question is should I keep it and put it on the rental market, or is it time to sell?

Is now a good time to buy a rental property? We asked our resident Asset Manager, Jon Martin, to weigh in on the topic of acquiring rental property in 2022

Welcome to The Playroom