Check the index's volatility with charts onlineFigure out what the rate will adjust to in 7 years.Decide whether you're going to have the property 7 years from nowWould a shorter term ARM suit you better or would a 30 year fixed work betterWhat's the prepayment penalty and for how longJust a few things to find outBest of luckStephanie

@John Maxx   The key is to understand what your HELOC is based (the index) on and what your margin is.

We didn’t like those markets mostly due to the crime index being well over 500 in each location and relatively low appreciation over the last 20 years.We came down to Killeen, Phoenix, and Boise as (for right now) our top 3 markets based on a variety of stats but mainly population growth, household income, and home value growth.Our next step is now reaching out to agents in those locations and running analysis on a variety of multi family properties in those locations to try to find a good deal to start making offers.Would love to hear your opinion if those are good logical next steps and any ideas/thought you may have here.Our goal is to purchase our first rental property in this quarter (Q4 of 2021)!

Or just throw your cash in an index fund and forget it is there. 

HI Steve,The rate is not fixed, its based off the 1 month CMT (constant maturity treasury) index + usually 3.75% (the index is not fixed but the margin is fixed) and its interest only during years 1-10.It does not expire or balloon like commercial loans do. 

The Cincinnati court index has been a great $100 investment for me.

It's just like buying stock, but instead of buying an index fund, you're buying shares in a specific company, and since the transaction costs are high, you're going to stick with it no matter how it performs.Doesn't sound so great when presented this way, does it?

Does the interest rate need to be based on an index if it is a fixed rate /w a balloon?

Neither is better or worse, just different -  one is an aggressively managed portfolio of stocks, the other is an indexed mutual fund. 

It's kind of like the difference between buying an individual stock or an index.