Blog Post

Can your tenant run a day care center in your rental home?

americanheritageproperties • October 9, 2016

Short answer–Yes, provided they meet the legal requirements.

Long answer–
The availability of affordable child care has become a hot-button issue in San Diego, where the cost of living can make it difficult for families to get by unless both parents are working. For some families with children, the solution is to offer home-based child care for friends and neighbors who need it.

In California, the need for child care is considered so vital that state law gives renters the right to operate a family day-care business from the home regardless of whether their lease or rental agreement prohibits the “business use of property.” The law applies to all rentals, from single-family homes to apartments and condos.

Of course, renters who wish to run a day-care business out of their home must be sure they’re following the letter of the law and communicating the details with their landlord or property manager. For example, before anyone begins operating a child-care service, they must obtain a license through the California Child Care Licensing Program, which has a local office in Mission Valley. This license specifies the number of children the provider is allowed to watch.

Renters must provide 30 days’ advance notice to their landlord or property manager before they begin operating a child care service from the home. The state license application includes a form that renters can use to provide this notice.

It’s important to note that landlords are legally allowed to charge a higher security deposit to tenants who run a day-care business from the home. Landlords may want to charge a higher security deposit because of the higher risk that young children may damage the property. The California maximum limit on security deposits still applies (no more than double the monthly rent for an unfurnished unit, or triple the monthly rent for a furnished unit).

In addition to sharing licensing information with the landlord, the renter must also share evidence of financial responsibility. There are three ways to demonstrate financial responsibility: obtain liability insurance; secure a bond of at least $300,000; or get signed affidavits from each child’s parents acknowledging that they are aware of the lack of liability insurance or bond.

Beyond these key initial steps, child-care providers should be conscientious and respectful of their neighbors’ right to the quiet enjoyment of their own homes. Take steps to control or manage excessive noise, and be mindful of anything that could damage the property.

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By 1946674 March 27, 2025
You’re not just buying a house—you’re building a system. The BRRRR strategy is more than a catchy acronym; it’s a calculated framework for long-term wealth creation through real estate. But to make the model work, every step must be intentional. From scouting a distressed property with upside potential to getting the refinance terms that keep your momentum going, each move should serve the larger strategy: creating a snowball of cash flow and equity you can roll into the next investment. Buying Smart and Navigating the Financing Maze When you’re buying your BRRRR property , cash is king—but leverage is the game. If you're not buying with straight cash, consider hard money loans for the initial purchase and rehab. These are fast and flexible, even if the rates are higher. Traditional lenders won’t touch most distressed homes, so you’ll need financing that’s built for speed and risk. But the real play is having a solid exit plan from day one—know how you’ll refinance before you even close. Spotting Properties with Built-In Potential Finding the right property to kickstart your BRRRR cycle isn’t about chasing cheap deals—it’s about targeting opportunities that other investors overlook. You’re looking for distressed homes in appreciating neighborhoods, not just anything with a low sticker price. Pay attention to the numbers: after repair value (ARV) should leave enough room for rehab costs and still produce cash flow after refinancing. Drive the area, talk to neighbors, check school zones, and analyze rent comps before pulling the trigger—because the money is made at the buy. Crafting Clean, Clear Leases That Protect Your Property When renting out homes, a well-written lease agreement sets the tone for a smooth landlord-tenant relationship by outlining clear expectations, responsibilities, and protections for both sides. It’s smart to tailor each lease by deleting sections that don’t apply to the specific tenant situation, keeping the document simple, relevant, and compliant with local regulations. Once finalized, save your leases as PDFs—not only for easy sharing, but also for secure digital storage and quick reference during disputes or renewals. If your standard lease includes unnecessary clauses or attachments, you can easily delete pages from a PDF to streamline the final version. Rehab with Returns in Mind You don’t need marble countertops, but you do need durability and mass appeal. Stick to upgrades that improve function, safety, and rentability—new HVAC systems, updated kitchens, clean bathrooms, fresh paint, and LVP flooring are your go-to staples. You want the rehab to raise both the appraised value and the rental income, but without over-improving for the neighborhood. Think like a tenant but act like a landlord: practical, clean, and efficient wins every time. Tenant Screening Is Not a Guessing Game The wrong tenant can ruin your entire BRRRR timeline. You’re not just filling a vacancy— you’re protecting an asset . Run background checks, verify income, and call previous landlords every single time. Create a system that’s consistent, fair, and compliant with local laws so you’re not making decisions on instinct. Good tenants don’t just pay on time—they protect your property and reduce turnover, both of which matter when it’s time to refinance. When It’s Time to Refinance, Timing Is Everything Once the rehab is done and you’ve stabilized your tenant, it’s time to pull the equity out through a refinance . This step resets your capital so you can do it all again, but the key is hitting the loan-to-value (LTV) sweet spot. Lenders typically look for 75% LTV, so your post-rehab appraisal needs to justify the refinance amount. Have clean documentation ready—leases, repair receipts, rent rolls—and don’t wait too long, or seasoning requirements could delay your next move. Stacking Your Wins for the Next BRRRR The beauty of BRRRR is in its repeatability. Once the refinance goes through and your capital is liquid again, don’t sit on it—get hunting for your next deal. Use the lessons from your first property to refine your criteria and streamline the process. Build relationships with wholesalers, stay active in investor groups, and keep your contractor on standby. Every successful BRRRR adds more cash flow and equity, but also more experience—which becomes your unfair advantage. You can’t wing it with the BRRRR model. Every phase—buying, rehabbing, renting, refinancing, and repeating—requires focus, planning, and discipline. But if you stay committed to the process and treat each property like a building block, you’ll create a portfolio that pays for itself and compounds over time. This isn’t get-rich-quick—it’s build-wealth-smart. And once you get it right once, you’ll wonder why you ever considered doing real estate any other way. Discover unparalleled property management services with American Heritage Properties , where our dedicated team ensures your investment thrives.
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