Determining what to do on mortgage (rate lock)

[James Edwards]

Curious how everyone approaches the aspect of buying points, bigger down, or standard rate etc. 

Looking at a mortgage around 5% int, could get it down to 4% ish with $4k in points. 

My other choice is to leave it at the higher rate and do nothing, or perhaps take the money I would spend on points and make a large upfront principal payment. 

Any thoughts on how one would evaluate that? 

[Chris Mason]

Investment properties have a unique added element, and that is opportunity cost. Let's suppose that $4k in points improves the property cashflow $50/mo by reducing the payment by that much. Let's further suppose that $4k could be used to upgrade the kitchen, which would let it command $75/mo in additional rent. In this case, it's not immediately obvious that rate is the end all be all.

Typically the more beat up the property, the better it will be to invest in the property itself rather than the financing of said property.