30yr fixed or 5/1 on my second investment purchase
Happy Sunday BP!
Just recently got approved for my HELOC on my primary residence and plan to purchase my 2nd 4-unit building and am pretty stoked about it! I've got two buildings on my radar and plan to see them this week and hopefully shoot an offer on one of them! My current 4-flat cashflows about $800 a month and is currently on a 5-yr commercial balloon. I was about to refi into a 30-yr fixed but with the feds confirming no increase in the interest rate i figured i would wait till the end of the year to do anything.
Which leads me to my question about financing my second 4-flat. Im using my HELOC for the down-payment, after all expenses/interest accounted for in the monthly income, I will cash flow about $5-700 after all expenses (mortgage, taxes, insurance, utilities and the cost for using the HELOC).
My goal is to pay-down the HELOC i used for the down-payment ASAP, does it make more sense to lock in a lower 30-yr rate or do a 5/1 (commercial) and refinance and use the equity to pay off the heloc? My only concern is hedging myself against a higher rate in the coming years, but i want to pay the HELOC ASAP!
The terms im being presented are pretty good.
- 30 year fixed at 4.85% requires 25% down
- 30 year fixed at 5.3% will allow 20% down
- 5/1 arm at 5.125% requires 20% down
- I want to hopefully put down just 20% with the HELOC and no out of savings $$
The purchase price of the investments are about 350-400k.
I plan on keeping both investments long term for cash flow.
Thoughts or advice on this?
Most Popular Reply
@Tom Kaz using those rates, 30 year, no brainer.... how much more can the payment be for .2? Its pretty much Guaranteed that in 5 years, 30 year notes will be well over 5.3%. The 30 year gives you a ton more flexibility that the 5/1 will.