The Basics of Property as a Long-Term Investment Strategy

There are multiple ways to make money in real estate. Indirectly, you could invest in a real estate fund or a property management company. Directly, you could purchase properties with the goal of renovating and reselling them. Conversely, you could purchase and hold on to properties for their rental value.

Investing in rental properties is considered a long-term investment. That is one of the things that makes it so different from all the other options. Getting into property for the long term is all about spending money to make money. Over time, you build a large portfolio of properties that continue generating income month-after-month and year-after-year.

Sound interesting? Here are the basics of property as a long-term investment strategy:

Rental Properties Will Always Be in Demand

Long term property investments have long been viewed as among the most lucrative investments of all. There are two reasons for this:

Over time, property values historically rise.
The demand for rental properties will always exist.

This second point is critical to understanding why rental properties are such a lucrative investment. Should you choose to invest in residential properties, you can rest comfortably in the knowledge that there will always be a segment of society that chooses not to purchase. They will rent homes and apartments for their entire lives.

A similar situation exists in the commercial property sector. Commercial rentals will be in demand as long as companies continue doing business. If you own some of those properties, they can generate quite a bit of income.

Financing New Acquisitions

One of the trickiest aspects of investing in property is financing new acquisitions. Conventional loans take time to arrange. They can also be costly due to longer terms. On the other hand, hard money can be arranged much more quickly and tends to come with much shorter terms.

A hard money lender like Salt Lake City’s Actium Partners offers the opportunity to move quickly on lucrative deals. You get to closing faster because hard money lenders only need days to do what they do.

The one caveat here is that hard money lenders do not necessarily embrace every opportunity that comes across their desks. For example, Actium Partners does not get involved in residential properties or fix and flip projects. They tend to loan on long term commercial properties with rental value.

Leveraging Properties for New Acquisitions

This final point cannot be emphasized enough because it is where the money is made in long-term real estate deals: leveraging existing properties for new acquisitions. Remember that we are talking about long-term investments involving rental properties.

A rental property provides residual income. Over time, it also increases in value. Once an investor has 100% equity, all the increased value translates into profit. Likewise for the rental income – minus the amount spent on maintenance and renovations, of course.

The value of every property can be leveraged to acquire new properties. Because hard money lenders base approval decisions on collateral, the properties in an investor’s portfolio can act as collateral on new loans to obtain even more properties. Existing equity can always be leveraged for new acquisitions.

Turning Capital Into Profits

The ultimate goal is to continually turn over the investor’s capital so that it’s always going into new properties. This is how an investor builds a portfolio and the accrued wealth that comes with it. One property funds a second property, a second property funds a third, and so on. The end result is an investing cycle that builds momentum through residual income and increased growth.