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There are a number of different strategies you can follow when you get into the world of real estate investing. But the tried and true method of operating rental properties is still one of the best, most consistent, and most profitable strategies. Long-term rentals provide many benefits to investors, with great tax advantages and the potential for appreciation and passive income. When managed wisely, they can become the basis for a solid investment portfolio and the path to financial freedom. Continue reading as we cover the advantages of owning long-term rental property and how to fully utilize their potential for returns in your investment portfolio.
Consistent Cash Flow for Long-Term Gains
The main reason you invest in a long-term rental is to gain access to a steady stream of monthly income. This stable income can become a good base and a safety net, allowing you to comfortably expand into future opportunities. When compared to other investment options where returns are more volatile, returns from rental properties tend to require less effort which means they can be maintained for longer periods of time. However, creating a good system for managing tenants and filling vacancies will be crucial for ensuring consistent returns. Be sure to conduct thorough tenant screening and have a comprehensive lease agreement to protect your property and your rental income.
Building Wealth Through Property Appreciation
Another huge benefit of investing in rental properties is their potential for price appreciation. Since rental properties are very desirable investments, they tend to hold their value well and are resistant to market downturns. This means aside from the regular income they provide, quality real estate investments like rental properties tend to appreciate in value over time. They may even continue to appreciate while the overall market experiences losses. All said, these aspects combine to lead to some impressive returns for investors.
Tax Benefits That Boost Your Bottom Line
One of the lesser-known upsides to real estate investing is the ability to make use of tax deductions to reduce your operating costs and increase your returns. Many of the expenses related to your property can be deducted such as maintenance and repairs, mortgage interest, and even management costs. You can also get depreciation on your side by conducting a cost-segregation study, where all of the assets on the property are depreciated over their usable lifespan (even the building itself). Be sure to work closely with an accountant or other tax professional to maximize your savings and deductions.
Growing Equity Over Time
Equity is a powerful tool that allows investors to expand their portfolio without dipping into their own personal savings. It can be taken out of a property with a HELOC or refinance loan, and then used as a down payment on other real estate investments. The great thing about rental properties is that you build equity while your tenants pay down your mortgage. It’s a very effective way to grow an investment portfolio with little effort on the part of the investor.
Lower Turnover Means Less Hassle and Higher Profitability
Do not underestimate the power of good management when it comes to rental property investments. A well-managed property means less time spent solving problems and very often, more profit. You can achieve this by establishing regular check-ins with your tenants where you can address any of their issues in a timely manner. This also helps build trust with your tenants, and they’ll be more likely to stay at your property for longer knowing they’re in good hands. Addressing maintenance issues quickly also helps you avoid them from ballooning into larger, more costly issues and it can lead to better returns in the long run.
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?