The Rental Playbook: How Smart Investors Build Wealth That Lasts
Building a rental portfolio isn’t about timing the market—it’s about taking action, building systems, and playing the long game. Our latest episode of Calculated Interest features rental expert Nick Tierno, who has over 4 years working with investors to finance their rental properties, as he shows us how to break down the real strategies behind investing and maximize long-term wealth through rental properties.
Long-Term Success with Rental Properties
Rental properties factor in a lot of unforeseen expenses; it’s not just your mortgage—it’s maintenance, vacancy costs, and repairs. Unforeseen expenses may impact upfront profit from your rental properties; however, these properties are a long-term investment that will expand your portfolio and ultimately increase cash flow. There’s equity in the property that will continue to grow over time, and playing the long game with your properties will build long-term equity that you can keep within the family and build generational wealth.
Creating a well-developed portfolio means having a strategy that works best for you and your goals, rather than just sitting on the sidelines and trying to time the market to find the “perfect deal”. Being willing to jump in and really commit yourself to a deal will allow so many doors to open for you in terms of leverage and equity growth. So even if you break even in the moment, the equity growth of a rental property can later be cashed out to finance improvements on the property or used as a down payment on a new property.
Understand your strategy, where you want to look, what kind of cash flow you’re looking for, what you can afford with your liquidity, and then execute your plan to find success in your investment property. As you consider financing options, you may come to the realization that a DSCR loan is perfect for your investment needs.
What is a DSCR Loan?
A DSCR is a real estate loan based on a property’s debt service coverage ratio (DSCR), which compares the property’s cash flow to debt payments to determine eligibility. While conventional loans focus on the borrower’s personal income and finances, a DSCR loan will use the property’s rental income and liquidity to assess whether the borrower will be able to sustain the payment schedule.
DSCR loans are a bit of a niche product, however they’re gaining popularity as they continue to succeed in the marketplace. The latest LightningDocs report shared that September set a new record with 2,978 DSCR loans completed, with average rates falling to 7.24%. Investors who choose to apply for a DSCR loan experience a streamlined process with no tax returns or income verification needed, so they can focus on growing their portfolio and securing their investment properties as quickly as possible.
How to Build Your Business with the BRRRR Strategy
Veteran investors understand that the best way to go about building your investment business and growing your portfolio is through the BRRRR method:
Buy: Secure your finance with an investment loan and buy your property.
Rehab: Renovate the property to boost its value and make it rentable.
Rent: Lease the property to stable tenants to generate steady income.
Refinance: Use the equity from the property to do a cash-out refinance.
Repeat: Use the cash from the refinance to buy another property and repeat the process.
The Key to Success: Taking Projects One at a Time
One of the major downfalls for inexperienced investors can come from jumping from project to project, rather than focusing on one at a time to ensure that the property remains stable over time. Taking a few months after each project to ensure stability is key—it’s important to fill vacancies, make necessary investments in the project, and ensure positive cash flow. Once you’re comfortable with how one property is performing, you can then continue to scale your portfolio and begin to focus on your next major investment.
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