Any Opinions/information On Cash Flow ARMs???
Hi,
I'm brand new to real estate investing and will be purchasing my first investment property in the next month. While searching for mortgage lenders, I came upon one that told me about the Cash Flow Option ARM. I'd never heard of it before, but I was told that it allows you to maximize cash flow and choose one out of four payment options on a monthly basis.
Would anyone recommend this for an investment property? Our future property already has tenants, and even with a 30-year fixed the rent would cover the monthly PITI. How about for your own home? We'd like to free up some money to set aside for upgrades and repairs to the rental, but I'm concerned about how high the mortgage rate will rise since we plan on keeping the house as a long-term investment.
I'd appreciate advice or insight anyone has to share.
Thanks! 
Congrats on your first investment! These ARMs - also known as Option ARMs or Pay Option ARMs have been around for a while. You do get to choose the payment that you make each month which can help increase cash flow or get you through a vacancy crunch.
It takes some discipline, though, to not just make the lowest interest only payment each month. I'm considering a new loan called a Flex Saver which is a first position HELOC on my primary residence but I'm afraid that if I have that much access to my equity there's no telling what I'll do. :-D
If you're concerned about rates (and we should be) then I would suggest going for a longer term ARM (7-10 years) with the lowest possible caps to limit increases after the initial fixed rate period.
Have fun!
If the thing will cash flow on a 30 year fixed do that. We are in the lowest interest rate market in 40 years. Lock in that cheap money.
Due to current low interest rate, I prefer 30 yrs fixed. That way, I can lock the low rate as long as possible. I will consider ARM, if I plan to sell/payoff the house within the ARM term or I am in negative cash flow situation. For example, if I intend to sell/payoff the house in 7 years, then I'll choose 7 yrs ARM. There is no need to lock more than 7 yrs and pay higher rate. Some people believe that they can get better ROI from the extra cash flow. My opinion on that is you can pull out your equity different way (with HELOC for example) while still able to lock the current low rate.
Thanks to everyone for the feedback!