20 year fixed or 30 10/1 arm

[Alexander Churchill]

What's up BP! So here's the thing. I'm ridiculously indecisive about choosing which loan/rate to choose for my first multi-unit rental property. Almost to the point where it doesn't make sense to me why I'm beating myself up so much about 70 bucks a month in profit. Closing in 4 weeks. Have about a week and a half to decide. So here's the numbers: Property income Unit 1 - 650 Unit 2 - 625 Detached 4 car garage - 3/4 currently rented at $50/ month . So the income in is currently at 1425 per month with potentially $50 more (1425-1475 per month) Here's the Mortgage numbers: 20% down 20 year term- Fixed rate at 5% Principle - $346 Estimated monthly expenses (P&I/Taxes/Insurance) = $545 a month 30 10/1 arm 30 year term 10 year fixed rate at 4.63% Adjustable after 10 years Principle Years 1-10 - $270 •adjust every year starting year 11 •can go as high as 10.63% in year 13 •Limits on interest rate changes are 2% for first change and 2% for subsequent changes up to Maximum rate of 10.63% Estimated monthly expenses for first 10 years (P&I/Taxes/Insurance = $473 a month I know I'll probably have the option to refinance and my my main goal is to increase income and continue building a portfolio but also wanting to build equity/net worth as well. Someone please tell me to stop being cheap and go with the secured payment and rate especially with initial rates not being much different! Lol no really ADVICE PLEASE. Just want to here some opinions from different investors!

[Austin Fruechting]

Over the first 10 years you would only have an extra $9,120, then who knows over the next 10 years where interest rates will be.  So that less than $1k per year doesn't make a huge difference on your ability to invest more.

Go with the shorter term fixed.  You'll be paying down more principle faster.  So on the 20-yr you could cash-out refinance to buy another property years earlier than on the 30-yr.