Rental Property: The Long Game in Real Estate Investing

Rental properties are often the foundation of a strongly performing investment portfolio, and there is good reason for it. Along with providing investors with consistent monthly income, these assets also offer benefits in the form of equity building and tax advantages. They are also very stable investments, which means they are easy to finance and markets favor them in times of economic uncertainty. As a broker or real estate lender, offering a variety of products designed for rental properties helps you reach more investors who are looking to add a steady investment to their portfolio. Knowing how to position clients for success with rental properties helps you build lasting relationships that also grow your lending business.

Read on as we cover the key aspects of rental property investments including financing options and the strategies you can recommend to help clients find success.

Key Takeaways:

• Rental properties provide stability and predictable income, making them a cornerstone of strong investment portfolios.
• Long-term rentals offer equity growth, appreciation, and tax advantages like write-offs and depreciation.
• Financing options are favorable and flexible, including traditional mortgages, DSCR loans, and portfolio financing.
• Market trends favor rentals, with high demand in emerging markets such as Austin, Phoenix, Raleigh, Charlotte, Nashville, and Tampa.
• Success strategies include due diligence, tenant care, and leveraging tax professionals, while brokers can build lasting relationships by offering value beyond loans.

Why Long-Term Investing Wins

Long-term rental properties have remained incredibly popular among real estate investors because they provide stability and predictable income streams. The tenants who rent units tend to stay at them for longer, which means they require less management and have less risk when compared to vacation rentals or home flipping. The compound benefits of equity growth and appreciation also enable investors to utilize that equity to make further acquisitions. This makes them an ideal first step for investors who are looking to build a strong real estate portfolio. Additionally, investors can utilize tax advantages like write-offs and depreciation to take their investment returns even further.

Financing for the Long Game

Another great thing about the consistency of rental properties is that they are easier to secure financing for. Lenders view these as very safe investments, and as a result, borrowers can typically secure more favorable loan terms. There are also a variety of loan structures available for rental properties, from traditional mortgages to DSCR loans based on the net operating income (NOI) of the property. Investors can even make use of portfolio financing to combine multiple properties into a single loan structure, allowing them to simplify monthly payments and often receive better terms.

As a broker or lending partner, you play a crucial role in helping investors decide which loan structure is best for their deal scenario. Be sure to ask the right questions about their goals, and obtain details about the financials of the properties in their portfolios to help you make a better-informed recommendation.

Market Trends Favor Long-Term Rentals

Trends affecting the greater real estate market have made rental properties a very smart investment. With interest rates remaining high, many buyers have chosen to continue renting rather than purchasing properties to live in. This has increased demand for rental units and has improved returns for rental property investors. There are also many emerging markets across the US that have proven to be great for rental investing, including:

• Austin, TX
• Phoenix, AZ
• Raleigh and Charlotte, NC
• Nashville, TN
• Tampa, FL

Taking time to conduct due diligence and identify one of these rapidly expanding markets can be very beneficial for investment returns.

Strategies for Sustained Success

Lending partners also play the role of an advisor, gently guiding their clients’ strategies to ensure success. For rental property investments, always recommend that they take time to conduct due diligence and run the numbers on a property before making a purchase. Maintenance and proper tenant care will also be crucial, so be sure that they have a good system for tenant screening, and that they check in with tenants regularly to deal with any issues before they balloon into bigger problems. Finally, you should recommend that clients work with a tax professional to maximize their savings through deductions and depreciation. A tax pro can help investors conduct a cost segregation study and vastly increase their tax savings over time.

Broker Insights for Building Investor Confidence

Offering rental property loans gives you an opportunity to establish lasting relationships with investors who can become some of your best repeat clients. In order to achieve this, you should offer value beyond the loan. Take the time to run deal scenarios and share this data with your clients to demonstrate the long-term profitability of deals. Keep in regular contact with clients, whether by phone, social media, or through an email list, so you can stay top of mind when they start looking for financing.

When the time is right, you can begin the discussion about using a refinance loan to utilize the equity an investor has built for a new acquisition. Walk them through the benefits of using this strategy, the loan process, and help them find a property worth adding to their portfolio. This is how you build their confidence in you as a lending partner, which will help you become their go-to source for future investment deals.

RCN Capital

In order to maximize the returns on your clients’ investments, partner with 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 investors and lending partners. 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.