RE Investment strategy; lender credits

[Peter Kim]

Hello all!

I just purchased a 3br 2ba 1,500ish sq ft for 252,000k. After doing market comparisons, I believe I can charge anywhere between $1,500 at the lowest and $1,800 at the highest for rent. 

Obviously, the monthly mortgage (plus tax and insurance) will change depending on the % I borrow but I wanted to get everyone's feedback before I make a decision. I'll write down the rates below. 

2.75% - 0 lender credits - $1,327/mo mortgage
2.875% - $1,200 lender credits - $1,340/mo mortgage
3% - $2,023 lender credits - $1,337/mo mortgage
3.25% - $4898 lender credits - $1398/mo mortgage

I'm leaning more towards the 3.25% so I pay close to nothing for closing costs but obviously with the estimated rent, I would have to charge $1,600 to cash flow maybe $100. I do plan on selling this home in 3-5 years to break into the multi-family homes. 

[Justin Marshall]

I would be more concerned with those numbers as 1 months vacancy is actually over 1 years cash flow.  The numbers don't really work unless this is fully turnkey and you have no maintenance costs.  100/month doesn't even cover the service call fee for anyone to show up if you do have an issue.  Are you able to rent this by the room for a high rate or would it better suite Air B&B given your location? I don't know your market nor the caliber of house but the numbers seem so thin. If you can spend minimal to get to the higher end of your cash flow numbers I would go that route over worrying about interest rates. You have 71/month difference from lowest to highest rate.  I'd also attempt to negotiate some closing costs from the seller.  You would be money ahead to increase your loaned amount by the 5k and not worry about points and stay at the 2.75% as it would only increase your payment 20/month roughly to go this route.  Increase the purchase price and have sellers pay your closing cost.