10 Must-Know Tips for Success with Long-Term Rental Investments

Long-term rental properties are a great acquisition for any level of real estate investor, and there are many good reasons why they are so often recommended for investment portfolios. They provide stable income, appreciation potential, and the opportunity for further expansion by utilizing equity. They also have great tax benefits, and can even be managed passively through hiring a property manager. Have you been considering adding a long-term rental property to your portfolio? Here are 10 must-know tips for finding success with long-term rental investments.

Tip 1: Choose the Right Market

In real estate, location is everything, because this factor will have the biggest impact on how much demand you receive for a property. Rental properties located in high demand areas will sell for more, but they will also garner a better monthly rate. You can identify a lucrative market by taking a look at key statistics like population growth, vacancy rates, and the overall health of the job market in the area.

Tip 2: Know Your Numbers – Especially Cash Flow and ROI

If you want to have a profitable rental investment, you will need to have a good understanding of the numbers. While your income depends largely on rent, your expenses go beyond just mortgage payments and maintenance costs. Property insurance, taxes, and property management fees all have to be considered in your cash flow calculations. Once you have an accurate number, you can determine your yearly ROI; a healthy number for a rental property investment will fall in the 8-10% range.

Tip 3: Work with Reliable Private Lenders

Private lending can be the leg up you need to secure a lucrative opportunity and kickstart your investing success. Investors utilize private loans because unlike conventional mortgage loans, they can be approved faster and have more flexible terms while still offering competitive rates. Your personal credit is also less of a factor for loan approval, which means you still be approved for a loan with a less than perfect credit history. Just be sure that before you start working with a lender, you look into their reputation within the industry and read customer reviews to get an idea of the level of service they provide.

Tip 4: Screen Tenants Thoroughly

Having a rigorous tenant screening process can help ensure you have an easier time managing tenants and reliably getting rental payments. It’s standard that you check each applicant’s credit, employment history, and that you ask for references from previous landlords. It’s also important that you have a detailed lease agreement that covers all your bases, including your policies on late payments, pets, smoking, and subletting.

Tip 5: Have a Maintenance Fund in Place

A maintenance fund makes it easier to deal with repairs and emergencies, which tends not to be a matter of if, but when. Set aside about 5-10% of your monthly rental income so you can deal with these situations when they occur without causing you much of a headache. Additionally, you should strive to keep the property in good condition so that you’re less likely to run into these issues in the long run.

Tip 6: Consider Professional Property Management

Hiring property management can be a smart move for investors, since it frees up your time to focus on other areas of your portfolio. Management can handle day-to-day tasks like rent collection, addressing tenant issues, and maintenance/repairs, leaving you with the ability to focus on expanding or maintaining your other properties. You will have to compare the costs of management to your monthly income to determine if it makes financial sense, but it can often be worth the convenience it provides.

Tip 7: Use Leverage Wisely

The financing program you choose can have a big impact on your investment’s return and your bottom line. While more leverage allows investors to acquire more properties with less capital, there are also risks associated with overleveraging such as constrained growth and higher interest expenses over time. It’s recommended that you find a leverage amount that you can easily manage for your property while also netting you a healthy return. Be sure to compare multiple financing options from various lenders to find the best fit for your investment project.

Tip 8: Focus on Tenant Retention

Keeping your tenants happy is the best way to ensure they will stay at your property for longer. It’s important that you respond quickly to maintenance requests and concerns of theirs so that they know that they are in good hands staying at your property. It can also be good to conduct regular check-ins to see if they are having any issues, as this will create a more accommodating environment. Finally, it helps to offer competitive rent rates, so that your tenants feel like they are getting a fair deal for their money and are less likely to shop around for a better rate.

Tip 9: Plan for Vacancies

Despite your best efforts, sometimes vacancies cannot be avoided when managing rental properties. Planning for vacancies can help alleviate some of the financial hit, however. You can include vacancy expenses in your financial planning estimates to get a more accurate idea of your final return on the investment. You should also have a marketing strategy ready to quickly list and promote vacant units as soon as they become available.

Bonus tip: Vacancies make for the perfect time to perform renovations on your rental property, boosting your property’s overall value and the unit’s rental rate.

Tip 10: Keep Up with Local Rental Regulations

Understanding landlord-tenant laws for your state and local jurisdiction will help you provide a good experience to your tenants, and also cover your bases in the case of a legal dispute. It’s important that you familiarize yourself with eviction laws, rent control policies, and tenant’s rights for the market your property is located in. Additionally, it’s important that you follow the appropriate lease laws, and the regulations surrounding property management if applicable. Knowing these laws can help protect your investment and also ensure that you have a smoother management experience with your long-term rental property.

Final Tip: Secure Financing from RCN Capital

The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?