Here’s Why Long-Term Rentals are the Key to Real Estate Success

Real estate can be an incredibly lucrative investment strategy, and there are a number of paths to financial success in real estate. From home flipping to wholesaling to Airbnbs you have quite a few options to choose from. But the most tried-and-true method for obtaining generational wealth is still long-term rental properties. Rental investments offer a variety of benefits aside from their consistent monthly income, and over time they can lead to massive returns. Continue reading as we cover why long-term rentals make for such great investments, and how they are the key to success in real estate.

Long-Term Rental Basics

A long-term rental is simply an investment property that’s rented out for periods of 6 months or more at a time. When compared to short-term rentals or other types of real estate, these investments offer much more stable and predictable income. The demand for these properties is also very consistent, because people will always need places to live. In today’s high interest-rate environment, more and more people are choosing to rent over owning property, and that’s driving rental pricing up. This can mean elevated property values for long-term rentals, but it also leads to higher monthly income and an improved cap rate for investors.

Financial Benefits of Long-Term Rental Properties

There are several financial advantages to investing in a long-term rental. For starters, their consistent monthly income means you don’t have to constantly manage rental bookings just to ensure you receive revenue. This consistency makes long-term rentals very desirable, and owners can benefit from appreciating property values on top of the income these investments provide. Plus, as you continue to build equity over time, you will eventually be able to pull cash out with a HELOC and finance other investments. Finally, there are many tax deductions you can make use of with rental properties, and everything from mortgage interest to property maintenance costs can be deducted. Work closely with an accountant or other tax professional to maximize your savings.

Strategies for Success in Long-Term Rentals

In order to ensure a successful rental property investment, there are a few things you should know. First, before purchasing a property, be sure to dedicate an appropriate amount of time to due diligence and research. Understanding the market you’re investing in and choosing a property located in a good area will help you boost your returns.

Besides this, it helps to have previous experience managing rental properties, as you will be expected to provide a certain level of service to each of your tenants. This often means staying in regular communication with them, and tending to any requests in a timely manner. You will also want to take a minute to craft up a comprehensive lease agreement that covers all your bases legally and where you can establish any policies you’ve determined for security deposits, late payments, pets, and subletting.

Risk Management

You should take time to fully understand all the risks involved with a long-term rental before diving into an investment. Taking care of your property takes work, and neglecting your duties will inevitably mean a loss of income. Before making a purchase, be sure to order a professional inspection of the property to uncover any issues that may be costly to repair and eat into your returns. When it comes to maintaining the property, you should strive to address repairs quickly before they balloon into larger, more expensive fixes. This also helps keep tenants staying at your property; you will build trust with them over time if they know their problems will be addressed quickly. Finally, there are market fluctuations to consider which can affect your profitability, but luckily rental properties tend to be resistant to market downturns, and many of these risks can be mitigated with a healthy amount of due diligence.

Future Outlook

The future outlook for rental investments seems to be very positive despite ongoing challenges with financing costs and rising home prices. According to the latest RCN Capital Investor Sentiment Survey, 61% of investors expect the market to improve, while only 14% expect it to decline. Certain markets, such as California and Florida, are experiencing more issues than others. This only serves to highlight the need for more in-depth research when planning your investments. Taking the time to identify a trending market can lead to substantial returns. Be sure to take a look at key statistics like rental pricing, population numbers, and the health of the job market to help you find one of these up-and-coming markets.

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?