A transitional rental is the rental property investors want the flexibility to sell in the foreseeable future. Transitional rental investors are more focused on immediate cash flow and opportunities, rather than the life time costs of the loan. Visio Lending understands the importance of the transitional rental strategy to our borrowers, which is why our loan programs are tailored to help investors with this strategy thrive. Here is a complete guide to all our options to help borrowers optimize their transitional rental properties and grow their portfolios faster.
Rate Structures and Product Offerings
Our 5/1 ARM and 7/1 ARM rate structures were designed for transitional rental properties. Here’s why these products are useful for transitional rentals.
This rate structure enables investors to lock-in a fixed rate for five years before switching to an adjusting rate, and still amortizes over thirty years. Investors looking to sell their property within five years are guaranteed Visio’s lowest possible rates for the duration they plan on keeping the loan.
The 7/1 ARM allows a bit more flexibility than the 5/1 ARM for investors looking to sell their properties soon but want to wait on market conditions. The rates are slightly higher than the 5/1 ARM rates, yet they are locked in for an extra two years.
Visio’s standard origination fee is 1%, which most of our transitional investors keep, since it is the origination fee with the lowest upfront expenses.
Prepayment Penalty Options
Visio’s standard prepayment penalty is a 5/4/3/2/1 structure, which means if the borrower pays off the loan in year one, they must pay a 5% fee, in year two a 4% fee, and so forth. Since transitional rental investors are often looking for the flexibility to sell their rentals within five years, they opt for our other options to avoid having to pay a fee.
3/2/1 Prepayment Penalty Structure
With this option investors only risk paying a fee within three years.
3/0/0 Prepayment Penalty Option
With this option investors risk paying a 3% fee if they pay the loan back within the first year.
Editor's Note: This post was originally published in May 2020 and has been updated in June 2020 for freshness and accuracy.