170: Rookie Reply: ARM vs. Fixed-Rate Mortgages (Which Is Better For Cash Flow?)

Real Estate Rookie

BiggerPockets

Entrepreneurship, Education, Investing, Business, How To

4.7 • 1.8K Ratings

🗓️ 2 April 2022

⏱️ 15 minutes

🔗️ Recording | iTunes | RSS

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Summary

This week’s question comes from Channa through Ashley’s Instagram direct messages. Channa is asking: I have three rental properties and am looking to refinance them all. Should I do an adjustable-rate portfolio loan on all three or do separate fixed-rate loans on each property? As real estate investors, we tend to have many different options when financing rental properties. Some, like adjustable-rate mortgages (ARMs), may come with lower closing costs and slightly lower interest rates, while fixed-rate mortgages have slightly higher interest rates but boast the added security of long-term financing for a property or properties. While both have definitive pros and cons, the implications of both types of loans must be understood before you reach the closing table. Here are some suggestions when making the choice: Understand your long-term strategy for the property and which loan works for which exit strategy Run an amortization schedule on both loans to see the difference in your monthly payment If you decide to go with an ARM, make sure you know what you’ll do once your low-interest rate ends Calculate total closing costs to see if you have the reserves ready to go through with each loan And more in the episode… If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE). Links from the Show Real Estate Rookie Podcast The BiggerPockets Money Podcast Check the full show notes here: https://www.biggerpockets.com/blog/rookie-170 Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	This is Real Estate Rookie Episode 170.
0:04.3	My name is Ashley Care and I'm here with my co-host, Tony Robinson.
0:11.7	And welcome to the Real Estate Rookie podcast where what we do is we focus on those real estate
0:16.6	investors who are at the beginning of their journey. So maybe you've got no deals,
0:20.3	maybe you've got one or two and you're looking to scale up. If so, this is the podcast for you
0:25.4	because every week, twice a week, we're bringing the inspiration information you need to get started.
0:30.7	Ashley Care, what's going on? How are things in your neck of the woods?
0:34.7	Good. So today, we actually have a question from my DM. So if you wanted to jump into it today,
0:42.8	we'll get started. I'm actually excited about this one because this one we got to get a little
0:47.2	freaky in the spreadsheets as to analyzing numbers and figuring it out. So let me pull the question
0:54.5	here. Before we get to the episode, let's hear a word from our show sponsor.
0:59.8	Our current interest rates making you depressed about cash flow. What if it didn't have to be that
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1:57.9	or call 800-311-6781. That's 800-311-6781 to learn more about how you can get started investing
	...

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