30yr Fixed vs 7yr Arm

[Ashly Frasso]

Hi BP Team,

I have an investor in the middle of his BRRRR and would love your input.

He purchased a duplex for $1.1mm. He financed 80% with a 30yr fixed at 3.75% and hard money loan for the balance at 3% for 2years. After rehab the value is around $1.6mm. He lives in one. The rent of the 2nd unit only covers the conventional loan.

Which option would you recommend or is there another option I can present him?

Option A:

Refinance to a 7yr ARM at 3.25% and use the equity to purchase another profitable multi-family.

Option B:

Keep the current 30yr fixed at 3.75% and re-negotiate terms on the hard money loan.