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After the 2008 recession, short-term real estate investments like fix and flips became more and more popular as home prices began to rebound. And while this trend may be popular due to potential quick returns, real estate also makes for an excellent long-term investment strategy.
With a long-term rental property, you don’t have to worry about constant and dramatic ups and downs like you do with the stock market. The value of real estate rarely goes down. Plus, as long as you are profitably leasing out the property, you get to enjoy the “dividends” of passive income every single month.
Keep reading for three reasons why long-term rental real estate investments could be the perfect way for you to build a steady flow of income for years to come.
1. You Can Obtain Non-Traditional Financing
While most traditional mortgage lenders like banks are going to require proof of employment, W2s, payslips and tax returns, you can get non-traditional financing such as a DSCR loan (“debt service coverage ratio” loan) through a private lender like Temple View Capital.
Private lenders can also offer you other creative ways to obtain rental property financing, including ground up construction loans for build-to-rent properties and rehab loans to help you make improvements on a damaged or outdated rental property.
With flexible financing options, it can be more affordable to establish a long-term real estate investment than you may think.
2. There are Multiple Ways to Generate Revenue
For centuries, it was most common for rental property owners to only offer 1-year leases to tenants, the rise of short-term rentals has grown rapidly over the last decade.
It makes sense. AirBnBs can be more affordable and convenient for travelers than hotels. However, you still get to charge more per day, assuming you are able to stay booked. Plus, you get the assistance of filling your vacancies when you list with big brands like AirBnB and VRBO. They do plenty of marketing for you, like the estimated $91 million dollars VRBO spent on advertising in just 6 months.
Of course, offering a traditional 12-month or 24-month lease to long-term tenants is still a great option, especially with rent prices rising over 14% from 2021 to 2022. When you pair that increase in rent with the steady increase of your property value, you have a win-win with income today and for the future when you eventually sell the property or leverage it.
Most importantly, take the time to plan ahead of time and determine all of your costs so that you can ensure you achieve your desired ROI with your real estate investment.
3. Invest as Much or as Little Time as You’d Like
Some investors shy away from real estate investing due to the perceived demands it can put on your time. Whether it’s giving tours of a property, handling maintenance issues, tackling lawn care, cleaning a short-term property in between tenants or marketing a property - real estate has the potential to be more time-intensive than other investments.
However, there are many professional services to help take those tasks off your plate. Finding a reliable property management company can not only free up your time - it can also help you scale your real estate investment portfolio at a quicker rate.
And for short term rentals, there are even cleaning companies today who specialize in turning over properties from one short-term tenant to the next.
Additionally, if you are starting your real estate business while you’re still employed full-time in your career, you may not have as much time available. So, you require a property manager for right now.
However, as your real estate portfolio expands, you may find yourself at a place where you choose to leave your career and be your own boss as a a full-time real estate investor. At that point, you may have more time to invest in maintaining your real estate properties (meaning you’ll get to keep more of the profits and increase your income). The good news is, it’s completely up to you.
Knowledge is Power
Ultimately, the best course of action if you want to create a steady flow of income with long-term real estate investments is to obtain as much knowledge as possible.
First, know your goals. Decide on a specific location, what type of property works best for you and how you’d like to rent it out.
From there, you can start to do research and build a team of professionals to help you achieve those goals. From property managers to real estate agents, home inspectors and maintenance professionals, you can better ensure your success when you have a great team behind you.
And of course, your real estate investing dreams cannot become a reality without the right financing in place. That’s why it’s important to speak with a lender like Temple View Capital sooner rather than later. Once you have the perfect strategy in place to finance your real estate purchase, the sky's the limit.