I used to think a 30-year fixed was the only way to go for a rental property

For years, I just got a standard 30-year fixed mortgage on every rental I bought. It was simple and the payment never changed. Then I bought a duplex in Cleveland last year, and my lender showed me a 5/1 ARM with a much lower starting rate. The math was clear: I'd save about $280 a month for the first five years, which I could use for repairs or to pay down the loan faster. I was nervous about the rate changing later, but he explained how I could refinance before the adjustment if rates were still good. I went for it, and that extra cash flow has been a real help with some unexpected roof work. It made me realize I was just sticking with what I knew without looking at other options. Has anyone else used an ARM on an investment property and how did you plan for the rate change?

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fox.derek7mo ago

My buddy got burned on an ARM when rates spiked and he couldn't refinance.

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diana206mo ago

Yeah that "gamble to get in the house" line is SO real, my cousin lost his house the exact same way.

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emery_murray7mo ago

But what if your buddy's ARM was the better deal for years before that spike, @fox.derek? He probably saved a ton with that lower starting rate compared to a fixed loan. Sometimes you gamble to get in the house and it just doesn't work out later.

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