Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Real Estate News & Current Events
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated about 11 years ago on . Most recent reply

User Stats

870
Posts
664
Votes
James Park
  • Real Estate Broker
  • Johns Creek, GA
664
Votes |
870
Posts

The U.S. Dollar, 5 year ARM vs 30 year conventional & the snow ball effect.

James Park
  • Real Estate Broker
  • Johns Creek, GA
Posted

I've been reading @Mark Ferguson's website and been thinking about his loan strategy of taking out 5 year ARMs and focusing on paying off the mortgage within 5 years. I know other buy and hold investors in Biggerpockets have followed the same strategy of accelerating mortgage payments.

Here is why i personally struggle with this strategy. What if an investor has a million dollar mortgage locked in at 4% for 30 years spread about among 8 SFRs. Let's also say that this investor also has $750,000 in cash in the bank. Would it be wise for this investor to pay off $750,000 of his million dollar mortgage and just live off of his $8000/month passive income?

I feel that the downward cycle of the U.S. dollar has reversed in 2011 and is it in its early stages of its 6-7 year cycle making the dollar more valuable in the near future. If rates continues rise and CDs pay 5% like they did in 2007, aren't you in fact beating the bank at this point for any return over 4% on your cash? If your million dollar mortgage on your 8 SFRs rentals are fixed at 4% and in 2016, 30 years mortgage rates are at 7%. Wouldn't you keep the 30 year mortgage as long as you can and never pay more than you have to?

At the same time, I know that inflation is what makes a real estate buy-and-hold investor rich over time.

I am just not sure if having 75% of networth in real estate is right strategy, but i know that this allocation may be very common for many investor here on BP with 75% of their networth in real estate and perhaps 10% in cash. What are your thoughts? Perhaps is no right or wrong answer and varies by each individual's risk tolerance.

Most Popular Reply

User Stats

15,182
Posts
11,270
Votes
Joel Owens
  • Real Estate Broker
  • Canton, GA
11,270
Votes |
15,182
Posts
Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied

Yeah I have never been big on stocks.

People always say diversify. Okay buy multiple niches within real estate. There are plenty of areas to make up a percentage portfolio with.

Different niches cycle at different times.

If you buy right with real estate and hold long term odds are in your favor.

business profile image
NNN Invest
5.0 stars
3 Reviews

Loading replies...