Real estate investing is one of the most effective methods to start generating sizeable profit margins in a relatively short timeframe. There are a broad range of approaches to real estate investing—from fix-and-flip projects to new builds and everything in between—but one of the most popular methods has to be long-term rental properties.
Also referred to as ‘buy-and-hold’ properties, long-term investment assets are acquired by investors and subsequently rented out to tenants for long-term lease periods. This process allows investors to establish positive cash flow and leverage the power of the passive income from monthly rental payments to either grow and scale their investment portfolios or obtain true financial freedom.
Here is a closer look at the key benefits of long-term rental properties to help you determine if this investment approach aligns with your unique personal goals.
The key to any successful investment property is obtaining positive cash flow. Essentially, this refers to having a net profit after subtracting all expenses associated with operating and maintaining the property. Achieving this benchmark is very realistic for long-term rental property owners that have a viable investment plan and know how to properly manage the asset. Assuming that the investor is able to consistently secure long-term tenants to mitigate any potential lengthy vacancy periods, getting to a net-positive cash flow is a straightforward process. The resulting profits can then be leveraged to save for property enhancements or upkeep, or, alternatively, earmarked for the property owner’s savings or retirement account.
Investors can simultaneously generate instant profits with long term rentals through the aforementioned cash flow mechanism and see the overall value of the underlying property continue to grow through appreciation. Because long-term rentals are retained for an extended period, the market value of the asset will grow with time. Thus, if an investor has plans on selling he investment property at some point in the future, they stand to earn a sizeable profit via the transaction.
Short-term rentals like AirBnb or vacation properties are significantly less reliable than long-term investment assets in terms of predicting the amount of rental income it will generate over a given period. Although it is entirely possible to net sizeable profits from short-term properties, their overall success is highly dependent on several factors—many of which are outside the scope of the investor’s personal control. Things like economic fluctuations, weather, and location all factor into the level of demand a short-term property garners, thereby increasing the likelihood of vacancy periods that could eat into your profit margin. Long-term investment properties carry with them defined lease periods that enable owners to plan well in advance to ensure the property is always filled and thus generating positive cash flow.
The benefits of long-term rental properties are not limited just to financial gain—they also provide investors with an enviable degree of flexibility. For ambitious investors actively seeking to expand their real estate business ventures, long term properties can be leveraged as an active investment tool to fund future acquisitions and boost your chances of obtaining hard money funding. For part-time investors looking for a more hands-off approach, long-term properties are a great fit to generate passive income with relatively little day-to-day involvement—allowing you to focus on other areas of your life while still reaping the numerous benefits of real estate investing.
Ready to kick-off your real estate investment journey or expand your existing portfolio? Having a trusted lender in your corner with a track record of proven results when it comes to facilitating fast and efficient access to the capital investors need to close transactions quickly and with minimal hassle is a must for long-term success. That is exactly what you will get when you choose to partner with the experienced industry professionals at Gauntlet Funding. We have been assisting investors get the funding they need for more than two decades while leveraging our vast knowledge of the investment process to provide them with valuable insights and advice. Contact us today to learn more about how we can help you today!