This home is great due to its location and that is why I am strongly pushing for it.Here’s the situation:Purchase will be my primary residence initiallyPlan to house hack in year 1Rent the townhome starting year 2 and hold long termThe deal does not meet the 1% rule, but I’m buying based on location, appreciation potential, and long-term rent stabilityI plan to refinance into a fixed loan (FHA -> Conventional) once the market advises me to do soFinancing details:FHA 5/1 ARMThe ARM is being used because I currently don’t have the cash to qualify for a fixed-rate loanGoal is to refinance before year 6, ideally between years 1–4I understand townhomes come with additional considerations (HOA fees, rental rules), and I’ve reviewed the HOA guidelines to confirm rentals are allowed.For those who’ve done something similar:What should I be most cautious about with a townhome + ARM combo?

Great topic and important consideration.

The cash flow is not great, only slightly positive, but will soon go to zero as the HOA keeps increasing faster than rents.

Early visibility allows investors to analyze a property before competition increases.

Aligning increases with tax hikes is key.

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If you qualify, accelerated depreciation from cost segregation can potentially offset W-2 or other active income.In a typical cost segregation study, roughly 15–30% of the property’s basis may be reclassified into shorter-life assets (5, 7, or 15 years), which can significantly increase first-year depreciation.Under the OBBBA, 100% bonus depreciation for qualifying short-life assets is now permanent for eligible property placed in service after Jan. 19, 2025.

The broker was projecting 6% annual rent increases in a market where rents had grown 2-3% over the past three years.Property taxes would be reassessed at the new purchase price.

All leases expire this summer-City rental law restricts increases of more than 9% upon renewal.

Now for the bad news - you provided a 95% LTV loan secured by a mobile home, so that’s a huge negative (increases risk).