The Benefits of a Long-Term Rental Property Investment

Long-term rental real estate is an incredibly rewarding investment that should be included in every serious investor’s portfolio. Besides the obvious benefits such as monthly income and appreciation, rental properties have other advantages that you may not have considered. For example, the equity built over time can serve as a great down payment for opportunities to expand your portfolio, and it is often tax preferred. Leveraging all the benefits of this type of investment can be an effective path to building generational wealth. Continue reading for our in-depth guide on why long-term rental properties make for such great investments.

Modern residential apartment building exterior

Stable Income Potential

The most apparent benefit of investing in rental properties is that it provides you with consistent income on a monthly basis. The cash provided from collecting rent stretches beyond your total expenses, which allows you to pay off the mortgage and build equity while also being a good source of income. These returns are also much more consistent than other types of investments like stocks or bonds which tend to fluctuate. If you have amassed a portfolio of rental properties, you may be able to hire a property manager to handle the day-to-day operations, effectively turning your investments into passive income.

Diversification of Your Investment Portfolio

Another great reason to invest in long-term rentals is their diversification power, especially if you don’t have any real estate in your portfolio already. Investing in rental property, and real estate in general, is a very wise decision since there will always be demand for housing. Because of this, there is very little correlation between real estate and markets as a whole, which means they are less susceptible to market downturns. Real estate will often hold its value or even continue appreciating in these scenarios, unlike other investments.

Property Value Appreciation

Speaking of appreciation, this quality of real estate helps make it one of the best investments for long-term wealth building. By strategically selecting properties located in great neighborhoods and markets, you may be able to further increase your returns. Take some time to research different markets in order to find ones that have good potential for appreciation. You can identify these markets by looking at key indicators like population growth, home/rent trends, and the job market in the area. Local developments may also be a signal of a growing area that is good to invest in.

Tax Advantages and Deductions

There are also some significant tax benefits that you can make use of when you invest in long-term rental property. For starters, many of the expenses associated with running a rental business, along with the mortgage interest on your investments, can be deducted. You may also be able to conduct a cost segregation study to take your saving even further, by depreciating all the assets on a property. For acquiring new properties, you can leverage the equity you have built in a property with a tax preferred 1031 Exchange. Consider working with a tax professional to maximize your savings.

Building Equity

Equity is an incredibly powerful tool that allows investors to acquire properties without using any of their own liquid capital. With a rental property, you gradually build equity over time which can be leveraged by either refinancing the property or performing a 1031 equivalent exchange. As an investor, you may be able to utilize equity to diversify or quickly grow your portfolio. And don’t forget, the gains your property makes from price appreciation count towards your equity as well.

Inflation Hedge

Fighting inflation has been the talk of the financial world ever since real estate rates jumped in 2022. But did you know that real estate is one of the best ways to protect your wealth? As we mentioned, real estate tends to grow in value over time regardless of greater market conditions. One of the explanations is that since real estate is very much a useful and desirable asset, it tends to rise in tandem with inflation to hold the same relative value. This makes rental properties the perfect inflation hedge, and when you combine this with all the other benefits they provide they make for a powerful wealth building strategy.

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?