Helping Your Clients Build Wealth Through Long Term Rentals

Long-term rental properties are the basis of every strongly performing real estate portfolio, and there’s good reason for it. These investments provide owners with steady income, but they also offer other benefits like tax advantages and scalability through leveraging equity. Since quality housing is always high in demand, rental properties demonstrate healthy appreciation when compared to other assets. As a broker or lending partner, understanding this asset class and how it can provide value to your clients is crucial to your success.

In this piece, we’ll cover the key qualities that make long-term rentals such a smart investment, and how brokers play a key role in helping clients achieve their real estate goals with it.

Why Long-Term Rentals Are a Wealth-Building Powerhouse

Long-term rental investments can be very profitable, but what makes them such a strong foundation for a real estate portfolio? Unlike other strategies such as home flipping or vacation rentals, long-term rental properties are a more consistent, stable flow of cash. However, revenue can be increased by investing in a multifamily rental, as much of the property’s maintenance costs are shared between the units. Aside from offering monthly income, rental home appreciation is also very consistent, even in economic downturns. This helps make them a catalyst for portfolio growth, and investors can utilize refinance loans to realize appreciation returns and fund new acquisitions.

Additionally, there are major tax benefits that come with investing in rental property. Many of the monthly costs associated with your business can be written off, and you can make use of depreciation to maximize your savings. In a cost segregation study, the value of all the assets on a property, including the home itself, is depreciated over their usable lifespan. Be sure to work with a tax professional to maximize investment returns with cost segregation.

How Brokers Can Add Value in the Wealth-Building Process

Investors rely on brokers not only to connect them with financing solutions, but also as a real estate partner, refining their strategy and helping them make better decisions. Providing your clients with insights into the market helps you both win. Guide clients toward areas with strong rental demand, low vacancy rates, and a growing population. You can also offer to analyze specific investments, looking at comparable properties and return projections. By offering to educate your clients on analyzing properties, you establish yourself as a market expert and have the chance to build lasting business relationships with these borrowers.

Provide Tips to First Time Investors

Rental properties make for a great entryway into real estate, but new investors are more likely to find success by working with experienced partners like you. Establishing yourself as a broker that helps first time investors can be a great way to grow your business. You can offer beginners advice on how to set clear investment goals, planning a good exit strategy, and analyzing potential deals. Emphasize the importance of metrics like cash flow, cap rate, and DSCR. Help them understand the importance of good estimates and budgeting, including accurately predicting property expenses. This is also a great opportunity to transition to the conversation about financing options.

Common Mistakes Brokers Should Help Clients Avoid

There are a few common traps new investors fall into, but you can offer your expertise to help clients navigate these problems. The first and most common is overleveraging, which can easily be avoided, but it’s why working with a quality lending partner is such an important step of the investment process. A trusted lender will have experience in the rental financing space, but also have loan guidelines and an underwriting process in place that ensures all parties win.

Next is ignoring local market dynamics, and landlord-tenant laws. It’s important to take time to familiarize clients with these laws, as it helps them when structuring lease agreements, and familiarizes them with best landlord practices.

Last but not least is forgetting to create a contingency fund for the property. In the case of emergency repairs or vacancies, it helps immensely to have a fund to pull from to cover these expenses without having to dip into personal funds.

How Brokers Benefit by Supporting Wealth-Building Strategies

Brokers win when they help their clients build strong real estate portfolios. Satisfied clients often return to you with repeat business opportunities, including refinances, multifamily acquisitions, and portfolio loans. Happy investors will also often refer other investors to you as new business.

You can use customer testimonials to help you position yourself as a strategic wealth building partner. Share your success stories on social media and use them in your marketing tactics. A strong brand that’s verified by customer testimonials is easier to trust, and can lead to more new business opportunities.

RCN Capital

The best way to save on a real estate investment is to obtain financing from a lender that can provide you with 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 professionals. If you are looking to offer rental property financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.