Investing in real estate is one of the best ways to make money by a landslide. Real estate is also very diverse in its methods and strategies, with anything ranging from fix-and-flips through turn-key properties to Airbnb rentals. This begs the question: What are some of the best ways to make money in real estate? If you were to ask different real estate investors this question, you’re bound to hear a lot of different answers. However, the one answer shared by all would be to invest in long term rentals.
Long term rentals, or buy-and-holds as they are sometimes called, are rental properties that are purchased and rented out for long term leases. This is probably one of the most common ways to invest in real estate, but it is also one of the most lucrative. For this reason, we’ve compiled eight of the most important benefits of long term rentals.
1.) Positive Cash Flow
The bread and butter of any rental property is positive cash flow. In essence, having positive cash flow means to have a profit after expenses have been paid from rental income. For long term rentals investors, the goal of positive cash flow is very achievable. As long as a tenant can be secured for a long-term lease and all expenses are paid off properly, you can have positive cash flow. If you’re interested in looking for long term rentals with great positive cash flow, be sure to use Mashvisor’s property search.
Not only can you receive immediate profit with long term rentals through positive cash flow, you will earn profit through appreciation. Since long term investments are, well, long term, their value increases through time. Value will increase regardless if rent prices do. So, if you ever plan on selling the investment property after a number of years, you could make a huge profit. Investing solely for appreciation is not a bad plan, but investing in long term rentals for both positive cash flow and appreciation is an idea that will make your bank account smile.
3.) Consistent Rental Income
When you invest in short term rentals, rental income is not as reliable as you would like. Many factors come into play, like seasons, location, and tourist attractions. While some of these factors influence long term properties as well, one thing is for sure: long term rentals generate more consistent rental income. Tenants interested in long term properties plan on staying in that location for an extended period of time. This leads them to sign long-term leases, which ensures stability and consistency for you and your rental income.
4.) Active or Passive Investment
Long term rentals don’t just give you money, they also give you options. If you’re an up-and-coming investor looking to establish a real estate business, invest in long term properties. If you’re simply looking to make some extra bucks on the side, invest in long term properties. Long term properties are great for full-time investors because they offer a lot of opportunity. Also, being a full-time investor will allow you to invest in multiple long term properties, increasing your income. If you opt for being a part-time investor, you can consider owning a single long term property or investing just partially in a few properties.
5.) Tax Benefits
Most people hate dealing with their tax forms. Not if you’re investing in a long-term rental. Investing in a long-term rental means being able to deduct expenses off your tax forms. These types of benefits motivate people to get involved in real estate. If you’re investing in long term rentals, these advantageous deductions are just another one of the plentiful benefits you are receiving.
6.) Pay Off Debt, Plan for Retirement
With a steady stream of positive cash flow, long term rentals can help you with major financial decisions. After long periods of time accumulating wealth, you could be able to pay off various forms of debt you have. We are not talking about just mortgage. You could pay off any student loans or car loans you currently have with the money you make from long term properties. You could also build a retirement plan from the rental income. These two points are especially true if you plan to invest in multiple long term rentals.
Related: Real Estate Investing for Retirement
7.) Withstand Market Changes
The real estate housing market is dynamic and ever-changing. Properties’ values will increase or decrease over time, and rent prices will likely increase. With long term rentals, the rental market tends to improve the property’s value and rent. As previously mentioned, long term rentals appreciate over time. Their rent prices also uptick as time goes on. Long term rentals can also act as an inflation hedge. This secures the property’s value as an asset.
8.) Using Leverage
Buying investment properties is a great way to use leverage, which is mortgage in this case. And since long term rentals are one of the most common forms of real estate, securing a loan to buy them is not relatively difficult. Mainly, you will need cash reserves and good credit to purchase a long-term investment property. Once you qualify for a mortgage, you can buy the rental property.
Long term rentals are some of the best real estate investments out there. They are great sources of wealth, whether that includes positive cash flow or appreciation. They are also flexible investments; you could invest actively or passively in them. Long-term properties also provide great tax deductions. Investing in them is a smart way to erase any kind of debt you have or get ready for retirement. Being able to purchase long-term properties is not too difficult; as long as you qualify for a mortgage, you will be set. And finally, in an ever-changing real estate market, long term rentals tend to increase in their profitability. Don’t miss out an opportunity to buy long term rentals, something you can do by using Mashvisor!