Learn why Belong has been ranked in the top 3 most promising consumer startups of 2022, for our work in disrupting the outdated property management model.

Why Belong Was Named a Top Disrupter for Property Management in 2022

Business Insider recently asked top VC investors to name the most promising consumer startups of 2022. Belong is honored to be #3 on this list for our work in disrupting the outdated property management model.

Property management has failed both homeowners and the people that rent their homes. Disruption is finally coming to the home management space, but the reason Belong has been recognized is about more than great technology. Belong stands out from other disruptors in the market because of our mission to put people first. 

“We believe in a future where homes are in the hands of real people. Hopefully, this recognition helps homeowners and residents from all across the USA discover a new way to Belong”, says Belong Co-Founder and CEO, Ale Resnik.

The mission of Belong isn’t just to provide a better, tech-forward experience to home management. It’s to create authentic belonging experiences, empowering residents to become homeowners and homeowners to become financially free.

For a long time, renters have been treated like second-class citizens and property owners have been vilified as greedy monsters, profiting off people’s need for shelter.

We are making terms such as ‘landlord’ and ‘tenant’ obsolete, by replacing the entire system with a more human-centric residential network. One that humanizes and supports both homeowners and their residents.

How Belong supports individual homeowners to financial freedom

The last ten years has seen private equity funds concentrate on ownership of the housing supply. As a result, people now compete with massive corporations to access homes to live in and build long-term wealth. We want to put the power back in the hands of individuals to fight this inequity.

Belong is the stress-free alternative to property management. Individual investors can build equity and generate cash flow from their homes, without lifting a finger. Belong makes this happen by managing properties as both a home and an asset, offering:

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

…and we’re just getting started! Belong is simplifying the rental experience and helping more homeowners reach their financial goals through real estate. Visit our homeowner's page to find out more about services in places like Seattle, Los Angeles, San Francisco, Austin, Oakland, Miami and many, many more.

How Belong supports residents on the path to home ownership

For millions of Americans, renting isn’t a stop-gap. We have created a new system that provides residents with extraordinary service for long-term renting, or while building towards homeownership.

Karma Wallet is a service unique to Belong, that helps residents find homes they will love while contributing toward homeownership. For every on-time rent payment, part of the amount paid will be credited to the Karma Wallet. This can build towards buying an eligible home on the Belong network, or getting priority access to rentals.

Our residents also get access to a mobile app to manage the entire experience, with a dedicated 24/7 concierge service, in-house maintenance services, online payments for rent, and even professional moving services.

Join the world’s first residential network

Ready to learn more about how Belong is changing the world of home management and renting forever? Find out if your home is eligible for Belong here, or become a Belong resident by searching for available homes.

A comprehensive list of regulations and legal considerations when creating a lease for your real estate investment - and a simpler alternative to going it alone

How to Create a Lease for your Real Estate Investment Property

Residential lease agreements protect you, your investment, and your new residents. To create a lease for your real estate investment property, you’ll need to consider what policies and clauses need to be included. Then you can begin to structure your agreement using one of our examples and consider consulting a professional to help finalize your agreement. Best of all, we’re sharing a new alternative to help you create a lease and find residents who love your home as much as you do. 

Legal considerations for residential leases 

Residential leases provide both you and your residents with legal protections. As such, there are several legal requirements you’ll need to consider before creating a lease for your real estate investment property. All residential rental agreements must adhere to landlord-tenant laws in your area.

You’ll find that most states have requirements around security deposits, occupancy limits, property maintenance, late fees, and grace periods for late payments. These requirements will vary depending on the state where your real estate investment property is located. These legal guidelines may also dictate specific landlord and tenant responsibilities, which you must abide by. 

Most states will require that you provide your residents with specific information regarding lead paint and bedbugs. In some cases, you must include this information in the lease agreement. You may include educational pamphlets in other states as an addendum to the lease. 

You should also familiarize yourself with Fair Housing Laws, which govern how you can market a property, screen for tenants, and regulate the use of your rental home. These laws ensure that everyone has fair access to housing and prevent discrimination. There are federal and state Fair Housing Laws, and failing to adhere correctly can expose you to legal action. 

Further, additional regulations govern everything from the condition of your investment property to renting your home to people with children or service animals. Closely review all applicable laws and regulations before you begin drafting your lease. 

Once you’ve identified which regulations will apply to your rental property, you can begin collecting the basic information needed for a lease agreement. Naturally, you will need the name of your residents, the lease term, the rental amount, and directions for how your residents can make rental payments. 

Your lease should also include information about your investment property, including a description of the property and its current condition. You will also need to outline details regarding access to the property and usage rules for the property. For example, your lease should clearly outline parking and storage inclusions. Likewise, you can include details about any common or outdoor spaces. If there are rules for shared areas, like pools or gyms, you should also have those rules as an addendum to your lease agreement.  

Additionally, your lease needs to include information about any security deposits or fees that may be required. It’s also critical to provide clear guidance around utilities. The agreement should clearly state which utilities are the resident’s responsibility and indicate who is responsible for transferring or initiating utility service. 

Finally, a standard lease agreement needs to include a lease termination clause. More specifically, your lease termination policy needs to outline what will happen if your resident breaks their lease before the end of the rental period. Remember that what you include in a lease termination clause is subject to regulations, and you'll want to carefully review legal precedent or engage the services of a professional. 

Additional guidelines to include in your rental agreement

While the inclusions discussed so far are a great starting point for creating a lease for your real estate investment property, you should consider several additional items. 

Maintenance policies and procedures: These policies will describe the resident’s responsibility to maintain the property and create a process for notifying you of any damages or requested maintenance. Finally, these guidelines will outline what kind of alterations your residents can make to the property (i.e., painting walls).

Entry: Entry clauses outline how and when you will access the rental property and must be consistent with your state’s landlord access laws. This clause also includes guidance for what happens in the case of an emergency. For example, if you have a water leak and your resident is not home, these clauses grant you the right to access the property to turn off the water or fix the leak.

Prorated rent: A prorated rent clause can provide your resident with information about how prorated rent is collected and calculated. This clause is beneficial if your resident pays prorated rent at the beginning of their term. 

Subletting: Your lease agreement should include a clause that either permits or restricts your residents from subletting the property. In some cases, related clauses can dictate whether or not the residents can lease the property as a short-term rental.

Illegal activities: It’s critical to include a clause prohibiting illegal activities. This clause will help limit your liability. 

Rules and HOA Guidelines: This clause requires residents to acknowledge receipt of rules or additional guidelines as dictated by the HOA (pool rules, community guidelines, good neighbor policies).

Move-Out Guidelines: You’ll want to ensure your lease clearly defines your resident's obligations at the end of their rental period. These move-out guidelines might include any cleaning procedures, how damages are assessed, and the process for providing notice and returning the keys. 

Renewal: Finally, you may want to include information on how the renewal process works and any procedures your residents may need to follow. 

Additions and customizations for your residential lease agreement 

Depending on the specifics of your real estate property, there are several additional sets of guidelines you may need to consider including in your lease agreement. 

Smoking policies: You do have the right to prohibit or restrict smoking on your property. If you choose to permit smoking in some capacity, your lease agreement should clearly outline those expectations. 

Cannabis: Similarly, you have the right to prohibit the use of cannabis, even if it is legal locally. A drug-free lease clause will also prohibit tenants from growing cannabis on the property. 

Pets: If you choose to permit pets in your rental property, you must include guidelines and information regarding any pet deposits or monthly pet rent you may require. 

Co-signer requirements: A co-signer is designated to make the rental payments if the resident does not pay. A co-signer agreement can provide additional protection if a resident does not have a solid or significant credit history. 

Renters insurance requirements: You may also require your residents to retain a renters insurance policy that protects a tenant’s belongings. 

Lease examples for your real estate investment property 

Once you’ve considered which of these policies and clauses are appropriate for your rental property, you can begin to assemble a lease agreement. We recommend using these examples to understand how you can structure and organize your rental agreement. However, because regulations vary based on location and frequently change, you should use these examples only as a guide. These examples do not constitute legal advice. 

Protect your real estate investment and work with a professional 

Your lease agreement is essential to protecting your real estate investment property. Because its importance cannot be understated, we highly recommend that you consult with a professional to ensure that your lease agreement protects your best interests and does not violate federal, state, or local laws. 

An attorney specializing in real estate agreements can provide you with essential guidance. Remember that an attorney may not be familiar with your real estate investment property and its unique challenges, so you’ll need to come prepared and know what needs to be included in your lease. 

Learn the guidelines that dictate how you should calculate square footage for your rental home.

How to Calculate Square Footage (And Why it Matters for your Rental Listing)

When preparing a rental listing, you need to know the square footage of your property, but did you know that there’s more to square footage than a simple number? The size of your rental property is crucial in attracting potential residents, but specific guidelines dictate how you should calculate square footage. Further, square footage is essential to pricing your rental property correctly and attracting the right residents. 

How to calculate residential square footage 

Calculating the square footage for your rental property is relatively easy. You’ll need paper, a pen or pencil, a tape measure or a laser distance meter, and your phone or calculator to start. Having a second set of hands can also be helpful if you plan to use a tape measure. 

Start by creating a sketch of your rental property, or use an existing floor plan or layout if you have one. One by one, go through each room, closet, and hallway and measure the length and width of each space. Once you have the length and width of each area, multiply the length by the width and note the square footage of each room. Once you’ve moved through the whole house, add the square footage of each space to calculate the total square footage of your rental property. You can round up to the nearest whole number. 

What should be included or excluded when calculating square footage

Although calculating square footage for your rental listing is pretty simple, you may ask which spaces or rooms to include and which ones to omit from the home’s total square footage. 

Generally, you should include all finished and heated interior areas in a home, including hallways and closets. As a result, you’ll need to omit several spaces from the total square footage calculation. 

Exclude these spaces from your square footage calculations: 

Including the square footage of basements and attics

Calculating and including the square footage of basements and attics can present a few challenges for property owners. It’s best practice to indicate the square footage of any basements in your rental listings. You should also note what portion of the basement is finished or unfinished. 

In some cases, you may include the square footage of a finished basement in the total square footage of the home. However, some local or state regulations may require that basement square footage be listed separately, even if the basement is finished. 

Similarly, you can include the square footage of your attic if the space is finished and the attic has a ceiling height of at least 7 feet for 50% or more of the area. Additionally, you can include covered or enclosed porches if your home’s HVAC system heats them. 

Ultimately, you should aim to accurately and fairly represent the square footage of the rental property to ensure that you attract the ideal residents.  

How to verify your property’s square footage 

If you’ve calculated the square footage of your property, it’s a good idea to verify your calculations. There are a few ways you can do this. For almost every property, you can search public records. The county assessor typically creates and maintains documents that will include the home’s square footage. Start by searching the address on the county property appraiser's website. 

If you have the builder plans for your property, the square footage is likely already included in those documents. Most home plans will also include the square footage of each space within a property. If you purchased the home, you might also refer to the property’s listing from the time of purchase. Remember that this may not be an official square footage calculation, but you can still use this number to verify your own calculations. Finally, if you have any property appraisal documents, you will likely find the square footage included in the appraisal. 

Over time, industry leaders have worked to standardize the process and guidelines for calculating square footage. Square footage is a crucial measurement and indicator of your property value, and having accurate, reliable, and consistent data for each property is essential. As such, there is an effort to establish shared expectations around calculating square footage. Different states may require you to calculate square footage in a specific way for renting or selling a property. Further, several agencies have established standards for calculating residential square footage. 

The American Measure Standard sets voluntary guidelines for measuring residential square footage. These guidelines have been compiled and edited by a group of real estate professionals, including real estate agents, appraisers, assessors, home builders, and architects. 

Similarly, the American National Standards Institute (ANSI) also provides guidance on what constitutes living space and how you should calculate square footage. Fannie Mae uses ANSI standards for all appraisals to ensure consistency across the country. These guidelines only apply to single-family homes and not to apartments or condos.  

How to include square footage in your rental listings 

Once you’ve calculated the square footage for your rental property, you can consider how to communicate this information in your rental listing. Knowing the square footage of your property and effectively communicating that information to potential residents is essential to finding a good, long-term fit for your home.  

Most importantly, avoid misleading potential residents as this will lead to disappointment or can result in attracting the wrong potential tenants. It’s best not to include your garage or unfinished square footage in the total number when you list the property. 

We recommend that you also clearly describe any particularities or things that might end up surprising someone when they see the property in person. Including this information upfront will help you avoid showing the property to potential residents who may be turned off by something omitted in the listing. Good residents will appreciate clear, honest communication and an accurate representation of the property. 

How to use square footage to price your rental property 

The square footage of your property is a critical factor in determining the rental price. While demand, amenities, location, and other factors specific to the property will influence rental pricing, square footage can be a useful starting point in determining the rental price of your property. 

To use square footage as a starting point for pricing your rental property, compare the rent prices of local rentals with similar square footage and the number of bedrooms and bathrooms. You can also determine the rental price using a per-square-footage basis formula. What’s your price per square foot, and is that consistent with similar properties in the area? In densely populated or popular locations, you can expect a higher rental price per square foot than in suburban or rural locations (but other amenities may also influence rental pricing). 

Pricing your rental property is a challenge, and while square footage can aid you in determining the right price, it’s only one factor. 

Pricing your rental property is easy with Belong 

If you’re looking for support in pricing your rental property, look no further. Belong combines current market data with real-time insights into the demand for similar properties in the local rental market. We use first-class technology to determine the right price for your home, including what high-quality, long-term residents are prepared to pay right now. 

As a result, you experience fewer vacancies, good people who care for your home, and profitable rental income. On average, belong has 66% fewer vacancies on our platform, and we help residents find the right home within 19 days. 

Belong is simplifying the rental experience across the US and helping more homeowners reach their financial goals with the most hassle-free property management service; BelongPro.

Square footage is essential to pricing your rental property. Learn the guidelines that dictate how you should calculate square footage for your rental home.

How to Calculate Square Footage For Your Rental Listing

This guide breaks down common expenses and an example of property managing a single-family home on the rental market.

How Much Does It Cost to be a Landlord?

How much does it cost to be a landlord, really? Will you achieve positive cash flow once you've crunched the numbers? 

While the costs of being a landlord will vary greatly from house to house, considering common expenses and maintenance can help you make financial estimates for your rental property. This guide can help you prepare for the cost of being a landlord, adjusting costs o your specific circumstances and including debt owed on a property for the most accurate estimates.

Belong compiled the average costs of managing a rental property from a variety of sources including HomeGuide, Forbes Home, Bankrate, Zillow, and Investopedia. Property management costs have been averaged from industry and market analysis conducted across California, Washington, and Florida including Belong’s own pricing models. 

Disclaimer:We don’t enjoy using the word ‘landlord’. We prefer to refer to members in our network as homeowners and residents, not landlords and tenants, since we’re on a mission to upend and redefine the traditional landlord-tenant relationship. That said, sometimes the words tenant and landlord need to be used to provide clarity, because the costs for homes on a residential home will differ to a rented home — so in this article we use them interchangeably. This article provides a guide based on average costs for homeowners of residential property for rent in the US but actual costs will vary.

Example costs of being a landlord: Fixed costs

To determine how much it costs to be a landlord, begin by identifying and calculating the fixed costs associated with owning a rental property. Fixed costs for landlords include mortgage, insurance, property taxes, HOA fees, and rental licenses or inspections. These fixed amounts will account for most of the costs of being a landlord and vary greatly depending on the location, how much the home is worth and the amount of debt owing. 

Consider a two-bedroom rental home that has Seattle’s median rent of $2,699 per month. Sample fixed costs in Washington (above mortgage and any taxes owed) may include: 

Average rental property maintenance costs for landlords

To estimate how much it costs to be a landlord, consider calculating the annual maintenance costs. In calculating the yearly maintenance cost, homeowners should account for ongoing maintenance costs and common repairs or replacements. 

Common types of ongoing maintenance can include lawn care, pest prevention, gutter cleaning, and snow removal, plus the odd toilet or appliance repair. HVAC systems or pools will also require additional maintenance. If you expect your resident to address these maintenance needs, we recommend that those responsibilities are clearly outlined in the lease. 

In considering the costs of repairs, carefully evaluate the condition of your rental property. Older rental properties or properties that have not been recently updated will likely require more repairs. 

Ongoing maintenance costs (national averages): 

Pest prevention: $80 - $120 per visit and $400 - $950 per year

Pool maintenance and operation: $3,000-$6,000/year 

Clogged drain or toilets: $75-$300/each 

Average rental property management costs 

If you own a rental property, you will likely choose to either self-manage the property or engage a property manager or property management company. These options each come with different costs.

If you choose to self-manage your rental property, you'll need to account for various costs. You should also factor in the cost of your time or the expense of hiring someone for specific tasks. 

On average, here is a breakdown of costs to manage a rental property:

Cost to list property: $0 - $29 per listing site

Photography of property: $110 - $300 per session

3D tour or video: $200 - $5000 per session

Accounting or tax professional fees: $2,000+ per year

Legal fees or attorney: $150 - $400 per hour as needed

Tenant verification tools: $20 - $40 per applicant 

Additional costs to consider include mileage and home office costs for self-managing a home. You may also incur cleaning costs before putting your home up for rent, though after this will generally be taken care of by vacating tenants or the security deposit.

If you choose to hire a professional management company to assist, many of these costs (such as tenant screening, marketing, photography, creating a lease) are included in a flat management cost, typically 6 - 12% of the monthly rental income. 

There are also additional property management fees that homeowners should factor into the costs of being a landlord. Depending on your property management contact, you can expect to see some or all of the following fees: 

Placement fees: 50% - 100% of first month’s rent per new tenant

Maintenance Markup: 0-20% of contractor fees

After-hours & holiday contact: 0 - 25% surcharge

Lease renewal fees: $0 - $250 per contract

Inspection fees: $0 - $150 per inspection

Advertising/marketing fees: $150 - $3000 depending on package

Eviction protection: ~$200 or additional 1-3% of management fee

Source: Belong analysis of property management companies in California, Washington and Florida, as well as own market knowledge/fee structure. Belong does not charge fees for set-up, lease renewals, eviction protection, marketing and more. 

Meet Belong. A modern-day solution for landlords. 

What if there was an alternative to traditional property management? Belong helps residential property owners attract, find, and retain residents who love their homes. We work with single and multi-family homeowners with either a vacancy or a current resident. We help make renting out your home more enjoyable and profitable—all with transparent pricing and no hidden fees. 

Belong offers homeowners everything needed to manage their rental property

Belong helps prepare your home for future residents by completing any maintenance or repairs that you might need. We also help you identify the right rental price for your home using a combination of expertise and technology. Belong markets, shows your home to potential residents, and creates 3-D virtual walkthroughs and photos. We also screen and place your new residents using a comprehensive vetting process.  

Finally, Belong manages the relationship with your residents. Our Member Service Team will handle all communication and requests. We collect rent, schedule visits, and process maintenance requests. 

We understand the costs of owning a rental property and support our homeowners by offering them guaranteed rent. You'll get paid monthly, even if your resident pays late or not at all. We feel confident enough in our ability to find the best residents that we're willing to guarantee your monthly rental income. 

How much does it cost to be a landlord? This guide breaks down common expenses and an example of property managing a single-family home on the US rental market

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. 

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