How Rental Property Investments Help Your Clients Build Wealth

Rental property investments are a great addition to an investor’s portfolio, and there are a number of reasons why they make for such smart acquisitions. Rental investments provide owners with reliable income, and due to steady demand, they consistently grow in value, providing additional returns through appreciation. They can also provide tax benefits and other opportunities to investors through leveraging equity and refinancing. All in all, they make for one of the best investments for those looking to build long-term wealth. Continue reading as we cover the wealth building benefits of this asset class and how you can provide maximum value for your clients with these investments.

Understanding the Investor’s Goals

The conversation around rental property acquisitions should start by discussing what the investor’s ultimate goal is. It’s important that you tailor their investment strategy to help them reach these goals. Some investors may be looking for cash flow, while others will prefer a more hands off approach seeking to gain value through appreciation. Knowing the investor’s preferences will help you choose property types and markets that are more suitable to their goals. The investor’s timeline will also be a factor, and will help you lay out plans for a short or long-term strategy.

Financing Options Available to Investors

Knowing all the options an investor has when it comes to financing their acquisitions can help you select the one that’s the best fit for their goals.

• First are conventional mortgage loans, which often provide the lowest interest rate but, on the downside, have many qualification criteria and a lengthy application process, which may not be suitable for every investment.
• Private and hard money loans provide a suitable alternative, with much faster and less stringent approval as they are often asset based. These loans also provide very competitive rates and high leverage amounts.
• If an investor has equity built in a property, they may want to consider refinancing or a line of credit to fund the acquisition of a new investment.
• Many lenders also offer bridge financing programs, which are short-term loans designed to fund quick acquisitions.

Finding the Right Properties

The other important factor for success is finding the right properties to add to your client’s portfolio. Taking the time to analyze market trends and understand demographics will help you make better decisions with your client. You can also make use of data aggregation tools, like ATTOM Data or reidealmaster.com, to help you conduct data-driven due diligence. Finally, besides utilizing the MLS, it may be helpful to work with partners like experienced real estate agents and wholesalers to find the best deals before they ever hit the open market.

Overcoming Common Challenges

There are some common challenges that investors will face, especially when it comes to scaling up their portfolios. Managing cash flow and keeping reserves is a crucial step, and it’s important that your clients stay on top of their finances to make acquiring new properties easier. Managing risk is equally important, which can be done by diversifying property types (single-family and multifamily) and investing in different locations to lower exposure. Finally, navigating stricter loan requirements for repeated acquisitions can be difficult, but a good solution is to obtain multiple funding sources, such as private or hard money loans.

Leveraging Equity and Refinancing

Equity is a powerful tool which investors can utilize to acquire properties faster and grow their portfolios quickly. It allows investors to generate liquid capital for acquisitions without having to dip into their own personal funds. It’s easiest when an investor already has properties which they can pull equity from, but beginner investors may want to consider refinancing a personal property to free up capital for their first acquisition. As a broker or lender, your job is to strategize with clients so you can structure deals that maximize their leverage and available capital, helping them achieve their long-term goals.

Building a Team for Long-Term Success

Speaking of long-term success, there are a number of key professionals a client should have in their corner to help them reliably reach their goals. First of course is a good real estate agent, with experience either in the market or asset class your client is interested in. An accountant or similar tax advisor is also crucial, as this will help an investor maximize their returns. A shortlist of reliable contractors will be important, especially if your client is planning to make major renovations before renting out units. Finally, for investors that prefer the hands-off approach, a good property manager or management company will be needed to ensure long-term tenant satisfaction and help give your client a worry-free investment experience.

RCN Capital

The easiest way to save on an investment is to obtain financing from a real estate 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 investors. If you are looking to finance a real estate project, RCN Capital has competitive loan options available.