When reviewing an investment property purchase, Velocity investors place a significantly higher importance on the property’s cash flow compared to other investors.  At 59 percent, cash flow ranks as the number one “absolutely essential” factor among Velocity investors when considering an investment property purchase compared to other investors who rank this factor at 32 percent.

QUESTION: How important are each of the following considerations when purchasing an investment property?

BASE: Velocity Investors (N=66). Other Investors (N=221). Values indicate the percentage of total investors surveyed in each sample.

The other considerations for both Velocity investors and other investors are the cost, location, and potential appreciation of the property.  Since location often determines the desirability or demand for a property, the combination of location, cost and potential appreciation together provide a determination of market value compared to other properties in the same area.  Therefore, the fact that these factors rank as the top considerations for purchase of an investment property comes as no surprise.

Although further down the list, Velocity investors also place a significantly higher value on the ease of renovation, at 23 percent compared to other investors at 14 percent.  This creates a 64% difference between Velocity investors and other investors and is most likely attributed to Velocity’s ARV Pro mortgage program, which allows fix-and-flip investors to finance the “as repaired value” value of a property.

Implications

If you’re a mortgage broker who wants to service the needs of independent real estate investors, understanding the importance of cash flow is paramount to your success.  However, your existing knowledge of neighborhoods and property values, even if it is limited to residential properties, will still allow you to discuss these considerations with investors. Among investors seeking to cash in on fix-and-flip investments, an understanding of the typical costs associated with these types of properties will help brokers to connect with short-term investors who acquire, renovate and sell homes as a real estate investment strategy.