What are long-term rental properties in real estate investing? Long-term rentals, also known as traditional rentals, are real estate properties that are rented out for extended periods of time, which typically last from a few months to several years.
This is the most common type of rental properties and the easiest to manage, making them the perfect choice of investment properties for beginner real estate investors.
But what are the advantages and disadvantages of long-term rental properties, and what sets them apart from other types of investment properties, and from short-term rental properties in particular?
In this article, I will highlight the major benefits of investing in long-term rental properties to help you determine whether this is the type of rental property that you want to invest in.
Advantages of Long-Term Rental Properties
The main advantages of investing in long-term rental properties can be summed up in the following points:
- Easy to manage
- Low risk investments
- Flexible
- Easy to find
- Easy to finance
Easy to Manage
Long-term rentals are significantly easier to manage than short-term rentals.
This is due to the low frequency of tenant turnover, or the long duration of the tenant’s stay.
Typically, rental properties require the most management efforts during tenant turnover; when a new tenant wants to rent the property, you will need to put a lot of effort into screening the tenant, choosing the right tenant, handing over the keys, inspecting the property, collecting the safety deposit, conducting any repairs, cleaning the property, and other tasks.
With long-term rental properties, this won’t be a frequent task to handle. This is because long-term tenants will typically reside in the property for several months, and in the best cases for several years, which means you will only have to handle all these tasks once the tenants move in and expect to not do them again for a long period of time.
Additionally, long-term tenants will typically take more care of the property because they will be living in it for a longer period of time, which means they are less likely to cause any damages to the property, and are more willing to take care of certain expenses related to the property such as maintenance costs and amenities.
Generally speaking, if you’re investing in a few long-term rental properties, you might not need to hire a professional property management company to handle these aspects of your property, which is a major expense that you will not have to pay when owning a long-term rental.
Want to learn more about short-term rentals and their advantages and disadvantages before deciding on the type of rental property that you want to invest in? Click here to learn all about short-term rental properties in real estate investing.
Low Risk Investment
Long-term rental properties are low risk investments for two reasons. The first reason is, as mentioned above, that long-term tenants are less likely to cause any damages or result in unexpected expenses for repairing the property, so the risk of facing unexpected expenses is drastically lower than with other types of investment properties. The second reason is that once you sign a long-term lease with a tenant, you will be certain that your property will be generating a rental income for the entire duration of the lease, so you won’t have to worry about finding new tenants for the property in order for it to maintain its rental income.
Flexible
Long-term rentals are also the most flexible type of investment properties.
When your long-term rental is vacant, you will have the freedom to do any renovations or redesigns for the property in order to increase its value and be able to rent it out for more money.
These renovations can be minor, such as installing a heating system or redesigning the bathroom, or they could be major renovations, such as building a new room or a new floor to the property.
Naturally, you should always make sure that the changes that you make will result in the outcomes that you are hoping for, such as enabling you to ask for a higher rent on the property without affecting your occupancy rate.
Easy to Find
Long-term rental properties are the most common type of real estate properties around the world.
This makes it much easier to find long-term rentals to purchase or to invest in no matter what market you’re interested in.
More importantly, long-term rentals are the most common type of properties on listings websites and platforms. This means that you will have a large number of options to choose from when you’re searching for rental properties.
Some of the best websites that real estate investors use to search for and find rental properties include:
Easy to Finance
Perhaps the best aspect of long-term rental properties is that you will be able to purchase the property using a mortgage loan. Once you start renting out the property, you will have guaranteed that your mortgage payments for the duration of the lease will be paid down, and you won’t even have to use your own money to pay the mortgage.
Of course, it is important to have a solid financial plan and to make sure that the rental income that your property generates will be enough to cover the mortgage payments as well as any other costs or expenses associated with managing or maintaining the property. Any left-over money will be pure profit that goes straight to your wallet or your savings account, which you can use to purchase a second rental property to grow your portfolio and maximize your profits.
Want to learn more about the difference between long-term rental properties and short-term rental properties before deciding which rental strategy you want to use? Click here to read our short guide about the difference between these two rental strategies.
Bottom Line
Long-term rental properties are the perfect investment properties for beginner real estate investors.
Long-term rentals are easy to find, easy to manage, and easy to finance. This means that any real estate investor, even if they have very little experience investing in real estate, should be able to invest in a long-term rental without the need to do extensive reading about it, with a very low risk associated with the investment.
Make sure to read our articles about short-term rentals to learn about the difference between long-term and short-term rental properties before deciding on the type of rental property that you want to invest in.