Are you considering investing in real estate and don’t know which strategy to go with? Investing in long-term rental properties might be for you.
Rental property investment is one of the most common – and most effective – ways of building wealth and equity. They are often preferred by real estate investors who want to create another income stream. Long-term rental properties, in particular, are considered one of the most reliable income streams by a lot of investors.
Table of Contents
- What Are Long-Term Rental Properties?
- Why You Should Invest in Long-Term Rental Properties in 2023
- How to Find Profitable Long-Term Rental Properties in Any US Location
- Top 10 Cities With Profitable Long-Term Rental Properties
Rental property investment is divided into two main strategies: long-term rentals and short-term rentals. Each offers its own advantages and disadvantages, but both can be great income sources for investors. In this article, we will focus on long-term rentals and why they are worthy pursuits for an investor like you.
We’ll show you how to find a good market for long-term rentals with the right tools, like Mashvisor’s Market Finder. We’ll also point you in the right direction on where to look for rental properties. We hope that when you’re done reading this, you will have a better idea of how to proceed.
Real estate investing isn’t something you should take lightly. Certain risks are involved, especially since it involves a lot of money. As an investor, you should fully understand what you’re getting yourself into. If you’re serious about investing in long-term rentals, read on before you go looking for investment properties to buy.
What Are Long-Term Rental Properties?
Long-term rental properties are real estate properties that are rented out to tenants for at least six months at a fixed rental rate. Typically, contracts for long-term rentals indicate a full twelve months before they expire or are renewed.
Property owners may extend the lease term depending on certain circumstances. In most cases, if they end up with good tenants, the contract can be renewed for another term. On the other hand, if a tenant is somewhat negligent and irresponsible, the contract may be terminated. It is often the case if there are serious offenses or a breach of contract.
Most long-term rental properties are unfurnished. While some homes may be semi-furnished, landlords are not obliged to provide furniture and appliances. Another thing to note is that tenants are responsible for taking care of the utilities and paying for them.
Related: 5 Best Ways to Invest in Real Estate in 2023
Why You Should Invest in Long-Term Rental Properties in 2023
Now, you may have the resources to buy an investment property, but you also need a good reason—perhaps a few—to go into a certain investment strategy. There are several excellent real estate investment strategies to choose from. You can go with rental properties, house flipping, online real estate platforms, BRRRR strategy, and a few more.
All of them come with pros and cons, so it’s up to you to carefully weigh your options. When deciding, you need to be honest with your situation, especially when it comes to your finances. Real estate investing is not like other investment assets where you only need several hundred to a few thousand dollars to make it work.
Investing in real estate will set you back by hundreds of thousands of dollars to buy a property. That’s not counting the other costs and expenses that go with starting a rental property business.
However, long-term rental investments can give you compelling reasons to get on board. Here are some of the benefits of investing in long-term rental properties:
You Get to Have a Steady Monthly Income Source
Longer leases typically mean that the chances of your property being unoccupied will be minimized significantly. They also mean that you can expect a fixed income amount monthly from your tenants for a specific period. And unlike a short-term rental, seasonality and market conditions have very little effect on your property.
You Get to Save on Certain Monthly Expenses
As mentioned in the previous section, tenants for long-term rentals are responsible for the utilities. It means that they are expected to pay the monthly utility bills. Basic property maintenance falls on the tenant’s shoulders, such as lawn maintenance, light bulb replacements, cleaning, and pest control.
On top of all that, if you took out a mortgage to buy the property, the rental income you receive will help you pay for the monthly mortgage.
Related: How to Get the Best Mortgage Rate for Investment Property in 2023
You Have Long-Term Financial Security
Investing in rental properties not only gives you a more stable monthly income but also provides you with financial security in the long run as the property’s value appreciates. It makes investing in rental properties that much sweeter.
You Will Have an Easier Time Managing Them Compared to Vacation Rentals
When it comes to managing a long-term rental, it is far easier than running a short-term rental investment. Maintenance cost is lower thanks to your tenants. Marketing expenses are fewer since you don’t have to regularly advertise your property. Tenant turnover is also held down to a minimum. All in all, long-term rentals require less of your time and effort.
How to Find Profitable Long-Term Rental Properties in Any US Location
Now that you have several very good reasons to invest in long-term rentals, the next step is finding the right properties that align with your goals.
Here are a few simple yet very effective tips to locate the right long-term rental property for you:
Tip #1: Invest in the Right Tools
The right tools will help you accomplish certain daily tasks. It’s basically the same with real estate investing. To accomplish your goals, you will need the right set of tools by your side. Advancements in technology have leveled the playing field for us, giving us tools that were once only accessible to the wealthy.
We can now turn to online real estate platforms to assist us in finding the right investment properties that line up with what we want to achieve. And while there are plenty of real estate websites online, you need to be discerning about which sites can offer you the best tools you need.
One of the top real estate websites investors trust today is Mashvisor. Mashvisor is a real estate platform that’s been helping thousands of investors find the right properties for their rental property businesses. It offers high-quality data gathered from highly reliable sources like Zillow, Realtor.com, the MLS, and Airbnb.
It also includes several tools and features that make real estate investing a breeze, such as:
Market Finder
Mashvisor’s Market Finder allows you to locate the most promising neighborhoods and examine them in greater detail to see what they can offer you by way of ROI and revenue. It makes the hunt for a location a lot easier and more efficient. The tool will save you plenty of time that you can channel to other equally worthy pursuits.
Mashvisor’s Market Finder allows investors to search for potentially profitable cities or neighborhoods across the US housing market.
Real Estate Heatmap
Mashvisor also uses a real estate heatmap to help you choose locations based on criteria that are important to you. It functions like a weather map that shows you color-coded areas that indicate how well they are performing based on your filters. The color spectrum ranges from greens (exceptionally performing areas) to reds (areas performing poorly).
Using the heatmap feature makes it easier for you to identify which neighborhoods are worth checking out and which ones you should avoid.
Investment Property Calculator
Mashvisor also gives users access to a highly-intelligent and interactive investment property calculator that lets them do the math easily.
It utilizes Mashvisor’s data for its default numbers, but you can also customize your computations by entering the numbers you get based on your own research. It makes the Mashvisor’s calculator dish out very accurate and realistic computations and ROI projections.
Get access to Mashvisor’s Market Finder and other tools to spot affordable long-term rental properties and get you on your way to a thriving real estate investing career. Get started on your 7-day free trial today.
Tip #2: Expand Your Network
The real estate industry is one that is centered on people. It is not just about real estate properties. Your success as an investor will also have a lot to do with the people you make contact with daily. People give you good leads. They can also give you sound investment advice. People can help open doors for you in places you never thought of getting into.
Put yourself out there and meet as many people as you can—real estate agents, other investors, bankers and lenders, business owners, and other professionals. You never know what each of them can bring to the table, so keep expanding your network.
Tip #3: Perform Due Diligence
Lastly, we can never emphasize enough how important due diligence is. As a real estate investor, it is your responsibility to protect your investment. And the best way to do this is to make sure you know as much as you can about what you’re getting into.
If you’re getting into long-term rental investing, find out the things that make landlords successful. Be intimately familiar with your chosen neighborhood. Keep yourself up-to-date with past and current market trends and behaviors. Watch out for forecasts and predictions. They are things that will help you make informed decisions as an investor.
Related: How to Find Affordable Investment Properties With Huge Potential
Top 10 Cities With Profitable Long-Term Rental Properties
At this point, you’re probably already wondering which cities are ideal for long-term rentals. We already did the work for you and listed down ten of the most profitable locations according to Mashvisor’s March 2023 data.
The locations in the list below are ranked according to cash on cash return (from highest to lowest) and filtered using the following criteria:
- Each location must have a median property price of no more than $1,000,000;
- Each location must have at least 100 active listings on the long-term rental market;
- Each location must have an average monthly rental income of $2,000 and above;
- Each location must have no less than a 2% cash on cash return; and
- Each location must have a price to rent ratio score of 20 and up.
That said, here are the ten most profitable locations for long-term rentals in the US:
1. North Miami, FL
- Median Property Price: $858,896
- Average Price per Square Foot: $486
- Days on Market: 150
- Number of Long Term Rental Listings: 315
- Monthly Long Term Rental Income: $3,399
- Long Term Rental Cash on Cash Return: 4.33%
- Long Term Rental Cap Rate: 4.40%
- Price to Rent Ratio: 21
- Walk Score: 52
2. Savannah, GA
- Median Property Price: $506,726
- Average Price per Square Foot: $320
- Days on Market: 74
- Number of Long Term Rental Listings: 373
- Monthly Long Term Rental Income: $2,117
- Long Term Rental Cash on Cash Return: 3.69%
- Long Term Rental Cap Rate: 3.75%
- Price to Rent Ratio: 20
- Walk Score: 72
3. Stuart, FL
- Median Property Price: $754,015
- Average Price per Square Foot: $387
- Days on Market: 78
- Number of Long Term Rental Listings: 412
- Monthly Long Term Rental Income: $3,010
- Long Term Rental Cash on Cash Return: 3.42%
- Long Term Rental Cap Rate: 3.46%
- Price to Rent Ratio: 21
- Walk Score: 46
4. Wilmington, NC
- Median Property Price: $513,033
- Average Price per Square Foot: $405
- Days on Market: 71
- Number of Long Term Rental Listings: 133
- Monthly Long Term Rental Income: $2,150
- Long Term Rental Cash on Cash Return: 3.35%
- Long Term Rental Cap Rate: 3.40%
- Price to Rent Ratio: 20
- Walk Score: 30
5. Virginia Beach, VA
- Median Property Price: $506,109
- Average Price per Square Foot: $323
- Days on Market: 50
- Number of Long Term Rental Listings: 1,767
- Monthly Long Term Rental Income: $2,089
- Long Term Rental Cash on Cash Return: 3.34%
- Long Term Rental Cap Rate: 3.39%
- Price to Rent Ratio: 20
- Walk Score: 21
6. Winter Park, FL
- Median Property Price: $858,436
- Average Price per Square Foot: $406
- Days on Market: 124
- Number of Long Term Rental Listings: 176
- Monthly Long Term Rental Income: $2,964
- Long Term Rental Cash on Cash Return: 3.30%
- Long Term Rental Cap Rate: 3.35%
- Price to Rent Ratio: 24
- Walk Score: 25
7. Tampa, FL
- Median Property Price: $616,877
- Average Price per Square Foot: $587
- Days on Market: 99
- Number of Long Term Rental Listings: 2,053
- Monthly Long Term Rental Income: $2,561
- Long Term Rental Cash on Cash Return: 3.28%
- Long Term Rental Cap Rate: 3.33%
- Price to Rent Ratio: 20
- Walk Score: 46
8. Rockledge, FL
- Median Property Price: $506,380
- Average Price per Square Foot: $264
- Days on Market: 63
- Number of Long Term Rental Listings: 184
- Monthly Long Term Rental Income: $2,088
- Long Term Rental Cash on Cash Return: 3.21%
- Long Term Rental Cap Rate: 3.25%
- Price to Rent Ratio: 20
- Walk Score: 14
9. Cape Coral, FL
- Median Property Price: $583,749
- Average Price per Square Foot: $309
- Days on Market: 97
- Number of Long Term Rental Listings: 1,318
- Monthly Long Term Rental Income: $2,222
- Long Term Rental Cash on Cash Return: 3.21%
- Long Term Rental Cap Rate: 3.25%
- Price to Rent Ratio: 22
- Walk Score: 79
10. Melbourne, FL
- Median Property Price: $480,152
- Average Price per Square Foot: $276
- Days on Market: 75
- Number of Long Term Rental Listings: 652
- Monthly Long Term Rental Income: $2,041
- Long Term Rental Cash on Cash Return: 3.19%
- Long Term Rental Cap Rate: 3.24%
- Price to Rent Ratio: 20
- Walk Score: 76
Wrapping It Up
To end, investing in long-term rental properties is a great way to build wealth and equity. Of course, the disclaimer here is that you should do it the right way. It means setting the right goals, doing your homework, and using the right tools to help you achieve your goals.
Before you go all-in on long-term rental investing, carefully weigh your options. Study the market if it is right for your strategy. Consider the local economy and future developments and how they will impact your investment in the long run. To keep it short, do your due diligence.
You will also need to work with the right tools to get the job done. Mashvisor is one of the best sites that offer the best tools for real estate investing. With features like the Market Finder, real estate heatmap, and rental property calculator, investing in and managing a long-term rental property will be a breeze. With the right attitude and the right tools, you’ll go a long way.
Learn more about Mashvisor’s Market Finder and how it can give you access to the best and most affordable long-term rental properties in the most profitable markets. Schedule a demo now.
