6 Common Mistakes Investors Make When Scaling a Rental Portfolio

Scaling up a rental business can be hard, even for experienced investors. In 2025, a large portion of fix and flip investors became landlords due to circumstance, and retention rates reached all-time highs. This created genuine opportunities coupled with mounting risks. Research in the industry suggests that most property managers now aim for regulated growth of 25% or less. This is because they learned the hard way that aggressive development can put a burden on systems, staffing, and profitability.

As borrowing becomes stricter and rent growth stabilizes in 2026, portfolio growth will need more than just momentum. When growth isn't planned early, operational, financial, and execution risks add up. For brokers, knowing where investors go wrong when they try to grow a rental portfolio has a direct effect on how well their clients do, how stable their loans are, and how valuable the connection will be in the long run. Here are the most typical mistakes that investors make when renting out a property and how brokers may help their clients navigate them.

Mistake #1: Scaling Too Fast Without Operational Infrastructure

One of the biggest mistakes rental investors make is acquiring more units than their systems and processes can handle. As portfolios get bigger, it becomes much harder to coordinate maintenance, collect rent, follow the right rules, and report on them.

More than 60% of small- to mid-sized rental companies say that operational strain is their biggest growth problem, according to industry studies from late 2025. Investors have a hard time stabilizing cash flow and managing risk without defined operations and dependable partners. This makes things harder when it's time to refinance or renew leases.

Broker takeaway: Growth should happen at the same time as being ready to do business. When underwriting, look at more than just property indicators. Also look at managerial capability, reporting discipline, and scalability.

Mistake #2: Ignoring Cash Flow in Favor of Unit Count

One of the worst things you can do with a rental portfolio is grow it without a steady stream of cash. In 2025, expenses like insurance, labor, and property taxes rose faster than rents in many cities, which hurt profits even while demand was strong.

Investors who depend on appreciation or high rent assumptions will end up dealing with negative carry, DSCR problems, and liquidity strain while vacancies can derail their ROI entirely.

Broker takeaway: Stress-test cash flow using conservative rent and expense assumptions before recommending leverage or expansion.

Mistake #3: Underestimating Reserves and Liquidity Needs

Risk of liquidity grows with size. Vacancies and capital expenses don't happen very often, but when they do, it’s important to have the cash available to handle them appropriately.

Industry benchmarks in early 2026 suggest:

• 6–9 months of reserves per property for stabilized portfolios
• Higher reserve expectations for older assets
• Increased lender scrutiny on liquidity across multi-property borrowers

Insufficient reserves often force distressed sales or unfavorable refinances.

Broker takeaway: Encourage portfolio-level liquidity planning rather than asset-by-asset assumptions.

Mistake #4: Using the Wrong Financing Structure for Growth

A big reason why portfolios don't grow is misaligned financing. Using short-term products for long-term holds, uneven loan structuring, and not planning for refinance eligibility when buying are all common mistakes.

Income-based underwriting is very important for scalability because DSCR lending will start to become the most common way to finance rental investments in the coming years. The difference in total cost between portfolio loans and multiple DSCR loans can also have a big effect on long-term earnings.

Broker takeaway: Financing should help the investor's long-term plan, not just help them close the next deal.

Mistake #5: Failing to Standardize Market and Asset Selection

As portfolios expand across markets, inconsistency becomes costly.

Investors scaling too broadly often encounter:

• Varying regulatory requirements
• Uneven rent growth
• Inconsistent property management quality

In 2025, property management companies found that portfolios that were focused on two to three markets did around 18% better in net operating margin than portfolios that were spread out across many markets.

Standardization reduces risk, improves forecasting, and simplifies lender relationships.

Broker takeaway: Encourage focus. Concentrated growth improves execution and lender confidence.

Mistake #6: Overlooking Compliance and Regulatory Risk

As a business grows, its vulnerability to regulations grows as well. Laws about fair housing, local rental rules, and licensing requirements are very different in different places.

Industry reports entering 2026 indicate:

• 33% of rental owners now rely on professional guidance for compliance
• Fines and enforcement actions increased year-over-year in several metro areas

Compliance gaps can stall closings, delay refinances, and create reputational risk.

Broker takeaway: Investors who are growing their portfolios should prepare ahead of time for compliance, especially when they are moving into new areas.

How Brokers Can Help Investors Scale Smarter in 2026

Effective guidance focuses on structure, not speed.

Key broker support areas include:

• Aligning financing with a long-term hold strategy
• Evaluating operational readiness before expansion
• Modeling conservative cash flow assumptions
• Encouraging liquidity discipline
• Supporting standardized market focus

RCN Capital works with brokers all around the country to help portfolios expand in a sustainable way by offering flexible financing options that can be used in the real world.

Action Steps for Brokers Right Now

• Review existing client portfolios for scaling risk
• Identify borrowers approaching operational strain
• Align financing structures with long-term rental strategies
• Position RCN Capital as a consistent capital partner

Are you ready to help your investor clients with full portfolio finance options and advice on how to grow their businesses? Check out RCN Capital's broker program to learn how working with an experienced direct lender can help you grow your clients’ portfolios in a sustainable way.