2 Main Visio Investor Strategies and How to Implement Them

Posted by Hannah Lapin on Jul 15, 2020 9:00:00 AM

brick building with 1 blue and 1 yellow door next to each other

Visio’s Loan Programs are designed for investors and can be customized to meet investors’ strategies. Here is a look at the two main investor strategies we see- permanent rental strategy and transitional rental strategy- and how investors tailor our loan products to work with them. Plus, here are some tips on how to find these properties on Roofstock.com, an online marketplace for rental properties.

Permanent Rental Strategy

What it is: Permanent rentals are the rental properties investors want to hold onto long-term. Through this investment strategy, investors are looking to build a portfolio of rental properties to hold onto for the foreseeable future. These investors are focused on the long-term investment and are willing to pay more upfront money.

How to Customize Our Loan Programs for this Strategy

  • Rate Structure: Permanent rental investors often select the 30-Year Fixed Rate Structure. This allows them to lock in a low rate for thirty years.
  • Rate Buy Downs: If investors are happy with their rate, they might stick with our standard origination fee. However, often permanent rental investors will pay more upfront points in order to get an even lower rate.
  • Prepayment Penalty: Permanent rental investors usually stick with our standard 5-year prepayment penalty. Since they plan to hold on to their rentals long-term, a penalty for paying off their loan in five years is a moot point.

What to Search for in Roofstock to Find Permanent Rentals

  • Purchase Price: Look for homes at the higher end of the spectrum, typically these will be over $250,000.
  • Neighborhood Rating:  Roofstock has a proprietary neighborhood rating on all of their homes. Permanent rentals are usually in better neighborhoods with Roofstock neighborhood ratings of 4-5 stars.
  • Cap Rate: Look for cap rates of 6% of less. A lower cap rate indicates a higher quality property with lower effort and risk.

Transitional Rental Strategy

What it is: Transitional rental investors are focused on flexibility and market conditions. These investors want to buy and sell the right property at the right times. They are focused on spending the lowest possible amount upfront in order to have higher immediate cash flow. 

How to Customize Our Loan Programs for this Strategy

  • Rate Structure: Transitional rental investors often select either the 5/1 ARM or 7/1 ARM rate structure, depending on how soon they plan to sell the property.
  • Rate Buy Downs: Our standard origination fee has higher monthly payments then any of our buy-down options, yet this leaves transitional rental investors with more cash on-hand initially.
  • Prepayment Penalty: Transitional rental investors opt for one of our shorter prepayment penalty options, which shortens the PPP terms from five to three years . Although these options add basis points to their monthly rates, transitional rental investors will still save money long-term when they avoid a penalty fee for paying off early.

What to Search for in Roofstock to Find Transitional Rentals

  • Purchase Price: Look for homes at the lower to mid end of the spectrum, typically these will be under $200,000.
  • Neighborhood Rating: Transitional rentals are often in less established neighborhoods. Look for Roofstock neighborhood ratings of 1-2 stars.
  • Cap Rate: Look for cap rates of 8% or greater indicating a lower initial investment yet greater possible risk and return.

Looking for your next investment property? Sign up for Roofstock for FREE.  Found your investment property and ready to tailor our loan programs to meet your investment needs? Contact us to get started on your loan.

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Related: 3 Creative Ways to Sell a Tenant-Occupied Rental, Forbearance vs. Deferrals,  Rent Forbearance Programs- Develop a Plan

Topics: Real Estate Investor Tools