ARM loan smart for investment prop in todays economic climate?

[Griffin Pratt]

I'm a St. Pete based RE agent looking at purchasing rental property in the area. I'm having trouble making the numbers work due to the surge in home values following the pandemic paired with higher interest rates is making cashflow difficult. (although I've still been able to find a few diamonds in the rough). I am considering alternative financing options to help decrease mortgage payments and allow my margins to hit my targets. One such financing option that caught my eye is an Adjustable Rate Mortgage (ARM). My general plan would be to utilize a 5, 7 or 10yr ARM for the temporary lower interest rate and then sell/1031 or refi and lock in a lower fixed rate based on market conditions at that time.

My questions are, does this seem like a sound strategy and, while I have a general understanding of how the 3/5/7/10yr ARMs work, are there major or hidden drawbacks to be concerned about when financing with an ARM? Will I be able to refi as easily as I'm thinking or ae there hidden conditions that can prevent flexibility at the end of the fixed-rate period? Open to any advice, good or bad, from anyone with some experience financing with ARMs!

Thanks BP family,

Griffin