Maximizing Long-Term Gains with Rental Property Investments

Operating rental properties can be great for investors looking for consistent returns from real estate, as well as a strong basis for long-term growth in a portfolio. Rental properties have many benefits apart from the monthly income they provide, including tax benefits and the potential for appreciation. Learning about these advantages as well as how to maximize them can lead to impressive gains for investors. Continue reading as we cover some key tips for getting the most out of the long life of a rental property investment.

Do Your Due Diligence

There are lots of ways to improve the return of a real estate investment, but none of them are as important as doing your research beforehand. Due diligence really involves two things: understanding your target market, and choosing the right location within it.

It’s no secret that certain markets have better potential for long-term growth than others. Finding a lucrative market comes down to following real estate trends to identify growing areas, and then comparing the numbers on each option to help narrow down your selection. You can take a look at key stats like property values, rental pricing, and population numbers to get a good idea of the level of growth in a market. It can also help to understand the demographics of the area you’re investing in, whether it’s families, students, or young professionals, so you can better target them with your marketing efforts.

A good location can also be identified by a few key factors. First, what’s its proximity to job centers and other amenities like restaurants, shopping, or entertainment? Does it have good access to transportation options if amenities are far away? Is it located in a quiet area that’s great for family-oriented buyers? In a similar vein, does the area have access to quality schools? Look for properties in locations that you know are in demand and have good long-term growth potential. The numbers don’t always tell the whole story on the desirability of an area either. For example, you can expect that there will be increased demand for housing in an area where a major development is happening nearby.

Focus on Management and Maintenance

Providing a good experience for your tenants is crucial to ensuring you receive a consistent return on investment. Focusing on the management and maintenance of your property will help you on two fronts: not only does it improve tenant retention, but it also helps preserve the value of your investment. You should develop a system to maintain regular communication with your tenants and strive to address issues like repair requests right away to prevent them from ballooning into bigger problems. As you grow your portfolio and manage more rental units, it can be difficult to keep track of things and provide a consistently good experience for your tenants. This is where additional help like tenant management software, or even hiring a property manager, can be very beneficial.

Leverage Financing Options Wisely

How you choose to finance your investment will also have a significant impact on your bottom line. Of course, you will be looking to get the best interest rate you can to reduce your monthly mortgage bill, and this means shopping around and comparing different options. Besides traditional lenders, be sure to take a look at hard money lenders and private lenders that operate in the real estate space. Refinancing can also be a great tool for helping you expand your portfolio at a low interest rate. Over time, you will continue to build equity with your rental property, and you can eventually pull that out with a refinance or HELOC loan to assist you with the down payment on a new acquisition. If you have equity built in a property already, consider refinancing to help with the capital needs of your rental property investment.

How to Boost Your Income Potential

Once you have your rental property up and running, you can make use of some key strategies to improve your monthly cash flow. First, take a look at comparable rental units in the same area as your property to gauge competition in your market. If they’re priced higher, you could be missing out on additional income. If they’re lower, you may want to consider lowering your own prices to improve tenant retention and help you fill vacancies faster.

Investing in quality upgrades for your rental units can also be a smart way to boost your income. Energy efficient lighting and appliances will help you reduce monthly bills, and making renovations to units (while they’re vacant if possible) will improve demand for them, allowing you to fetch a better monthly rate. Just be sure that you don’t pick upgrades that have a bad return on investment. Stick to improvements that you know will have an impact like new flooring or a renovated kitchen. Alternatively, you can choose to offer desirable amenities like pet friendly features or in-unit laundry.

Tax Benefits and Deductions

There are lots of tax benefits that come with owning and operating rental property that you can utilize to maximize your investment returns. Many expenses associated with the property can be deducted, including maintenance costs, property taxes, and even mortgage interest. You can also benefit from depreciation by conducting a cost-segregation study. This is where you depreciate all the assets on the property over their usable lifespan, and everything from external upgrades to the building itself can be depreciated. These deductions add up, leading to some massive savings for investors. Be sure to work with an accountant or a tax professional who specializes in real estate to get the most out of them.

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?