Unlocking Steady Cash Flow with Long-Term Rentals

Long-term rental properties are smart, stable investments that provide owners with consistent cash flow and many other portfolio building benefits. With interest rates dropping, they have become an even more enticing strategy for those looking to build cash flow in their investment portfolios. As a broker or lending partner, this presents a great opportunity to expand your pipeline with new acquisition deals and refinance loans. Having a strong understanding of the asset class and how to maximize returns for clients will be key to your success in the coming months.

Continue reading as we cover the strategies brokers and financing partners can use to gain more clients and grow their businesses through rental property lending.

Key Takeaways:

• Long-term rentals offer stable cash flow, tax benefits, and portfolio growth, making them attractive in today’s lower interest rate environment.
• Brokers can grow their pipeline by supporting acquisition and refinance deals tied to rental properties.
• Flexible financing options like DSCR and bridge loans help investors with non-traditional income or credit profiles.
• Emerging markets and lower rates are creating new opportunities for rental property investors.
• Brokers add value by advising on ROI strategies, market trends, and connecting clients with experienced lending partners.

The Appeal of Long-Term Rentals

The advantages of long-term rental properties are twofold. Not only do they offer investors strong cash flow, but they also provide great tax benefits and opportunities for portfolio expansion through equity and refinancing. They also favor simpler property management when compared to short-term rentals. Owners are able to build lasting tenant relationships with the right property management, and in turn receive very stable investment returns. Investors who prefer a hands-off approach can even hire third-party property managers to take care of their portfolios and enjoy consistent cash flow with very little personal involvement.

Financing Long-Term Rentals

The other great benefit of rental property investments is that there are multiple financing options. Aside from standard mortgages and FHA loans, brokers can offer bridge and DSCR financing to their clients. These options are great for investors who are looking for more flexible financing, since loans are based on the value of the property and its overall profitability. That also means borrowers can still qualify for financing if their property doesn’t meet the strict lending criteria of banks, or if they have less than perfect credit or non-W2 income. Be sure to work with a number of wholesale lending partners, so you can offer a variety of loan options to your clients.

Market Trends and Opportunities

Overall, the real estate market has started to look more favorable for rental investors. Lower interest rates means margins have grown, since even a small drop can lead to a big change in profits after expenses have been considered. As a result, many fix-and-flip investors have recently switched to the rental model. Many emerging markets have also proven to be very profitable for rental investing, including Austin, Charlotte, Raleigh, and Denver. Brokers can position themselves for success by conducting due diligence on these markets, allowing you to better advise clients. Be sure to look at key statistics such as rental growth, vacancy rates, population growth, and the health of the area’s job market.

Maximizing ROI Over Time

As a lending partner, you play a crucial role in not just providing clients with financing, but also in advising their strategy to make the most of their investments. Rental properties present a great foundation for strong portfolio growth over time, and you can help clients maximize ROI through implementing key strategies. For example, recommend that they make enhancements that tenants will actually value, such as renovating the kitchen or bathrooms, updating flooring, or taking proper care of the property's exterior. Staying on top of maintenance is also crucial, since small issues can often balloon into bigger problems that become costlier fixes.

There are also several tax advantages to operating rental properties that investors can utilize. Many of the costs associated with running a rental business can be deducted, including mortgage interest and maintenance expenses. The property can also provide tax savings through depreciation by conducting a cost segregation study. Be sure to recommend working with a tax professional to maximize these savings.

Broker Tips for Supporting Investor Success

Let’s end with some tips for brokers who want to provide the most value to clients through long-term rental investing. Take the time to educate yourself on not only the types of loan programs available for rental properties, but also on the markets that you lend in. Utilize real data to help you understand the trends happening and differences between each market. This will help you give better advice to clients, and allows you to build lasting relationships with more opportunities for repeat business.

You should also ensure that you’re working with wholesale lenders that understand this asset class, and can provide you with both competitive programs and a stellar lending experience. Look into the track record of your lending partner, read customer reviews, and look for lenders that go above and beyond providing resources like marketing collateral and training materials to their broker partners.

RCN Capital

To help your clients maximize the returns on their next investment, 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.