Should I do this- Newbie

[Prasoum Dane]

Hello,

I am just starting in real estate investing and thought that I could do something with the house I am living in, which currently has $100,000 equity and is in area which has strong rental demand. Basically I have 30yrs mortgage which I am thinking of converting into 5/1 ARM and the savings, which I think would be 1% in interest, to invest in paying down the principal. I would be able to generate a cash flow of $500 by this approach and in 5 yrs I would be able to repay $30,000 in principal. At the same time, within those five yrs, and probably within two yrs, I would search for a new home and move. If after 5 yrs my cash flow still remains at $600 or more I will keep the property but if I can't refinance at the same rate or if my cash flow go down, I would exit and sell the house. Please let me know any downside of this strategy. Do people use ARM to build the equities in house.

Thanks for your help.

[Curt Davis]

I think you would be insane to do any type of ARM loan product!!!!!

If you were to refinance I would say put it on a 15yr loan and then aggressively pay it off.