Posted by Craig (IL) on April 16, 2006 at 13:30:52:
I don’t know your rental environment, but in mine, I’d problably pass on the deal unless I got a better price. Any ARM that got me that much better terms is going to adjust quickly, meaning that it’s benefits will soon be lost.
Secondly, I’m not sure of that appreciation rate. Four-units do not appreciate the same SFHs (which is I assume where you got that appreciation figure). And four-units can be difficult to sell.
pay options mortgage - Posted by Maxwell Boakye
Posted by Maxwell Boakye on April 16, 2006 at 09:00:18:
I found a 4 unit complex selling for 250,000 that will generate cash flow of about $8000 a year with 5% down if I do a pay option arm loan versus negative cash flow if a I do conventional financing. I read somewhere that pay option arm loans are only good if you expect great appreciation. This 4 unit complex is an area where I expect appreciation of 4-5%. When is it a good idea to use pay option arm loan to improve cash flow. This would be my first investment property.
Re: pay options mortgage - Posted by Rob
Posted by Rob on April 17, 2006 at 15:30:37:
You need to evaluate your deal thoroughly. Remember the equity is what will protect you. Will your property provide your desired cash flow with a conventional mortgage. You could use the pay-option to purchase and build your cash reserves for a couple of years. When you are ready to refi out of the option-arm, be sure that your property will cash flow with the new loan. The option arm may have negative amoritization so you must account for this. Personally, I like interest only loans since I have substantial equity in my properties and I don’t really care about mortgage pay down especially within the first 5 years.