Long-Term Investment Strategy In Real Estate
Buying and holding long term real estate can be a profitable investment strategy when done right. There are two main ways long term real estate can be profitable. One is through cash flow generated by the property. Your tenants are paying you every month and collect the difference between your cost and your rental rate. The second way long term real estate can be profitable is from appreciation. This is when your asset increases in value over time. If you’re strategic enough, you can benefit from both as long as you invest in the right property.
There are several strategies you should follow when investing in long term real estate. Every investor is in a different situation but you can increase your chances of finding success by following several strategies that we will outline. Start the process now by becoming familiar with the following strategies.
You’ve probably heard this before but location absolutely matters. Do your research before investing in a market. Real estate is local and what occurs in one market may be the opposite for your market. Things to consider are jobs, transportation, school districts, and shopping. Is the population growing or detracting? Is one neighborhood becoming gentrified? A great way to take advantage of the location is investing in the path of progress. Look for markets that have a strong job economy with a variety of industries. Families look for better school districts and safe communities. Families are also longer-term tenants. Consider some of the suggestions when reviewing the location.
Consider Long Term Financing
In the current economic environment, interest rates are down to all-time lows. There has been no better time than now to secure a long term 30 years fixed low-interest mortgage. Your overall payment is typically lower with a 30-year loan compared to 15 year and 5-year mortgages. By keeping your monthly expenses low, you can earn more of a profit per month from your long-term rental property. Additionally, you can write off the interest from your loan, and ultimately, it is your tenant paying down your mortgage. This is a great approach to maximize your cash flow which is the common goal for many long-term investors.
What is your game plan for managing your rental property? Who will be answering your tenant’s calls when there is a problem? How do you resolve issues quickly and cost-effectively? These are questions you should ask yourself and seek to put a system in place for. When there is a system established, you will have a much easier and passive time addressing issues that occur when holding on to your properties over the long-term. This is the difference between a professional investor and an amateur that is constantly reacting. Stay proactive and take advantage of systems to manage your processes when investing in long-term real estate.
There are many more strategies but if you follow the ones mentioned, you have a good place to start when it comes to investing over time. Take your time to master the different strategies and implement them in your long term rental business.