Investor Pay Option
ARMs
Dear Real
Estate Investor
,
Have you heard about all the bad press
about Cash Flow
ARMs, Pay Option ARM, Smart
Loans
and all the other variations of loans with negative
amortization? A lot of it is warranted! This loan is a tool and
just like any tool, there is a right way to use it and a wrong
way!
Most people that get Pay Option ARMs do it
simply to get a lower payment on the house that they live. They
couldn't afford it any other way. They finance the house to the
hilt and suddenly they get upside down!
Using Pay Option ARMs are a good choice when
your home is seeing good appreciation (5% or more) because this
type of loan has the ability for negative amortization (the
loan balance can actually increase over time). In this case the
amount of appreciation will easily out pace any increase in the
loan balance.
Pay Option ARMs are good for property that you
are financing under 90% of the value. In fast appreciating
markets you can get away with a higher amount but leaving 10%
equity in the house is bare minimum. Why? Well, If you sell the
house through traditional means, your selling cost could be
anywhere from 9-15% of the sales price! No one likes the idea
of having to come out of pocket to get rid of a house! You want
to make money!
We have found the ultimate use for Pay Option
ARMs!
How did I find out? Well, I am an investor, too! In trying to
maximize the income on my own property, I gave it a shot. I put
a Pay Option ARM on one of my houses and HOLY.
. . I'll show you an example in a second. But first, I have a
few questions for you.
Do you own investment property? Do you plan on holding on to it
for 3 years or less? Do you have at least 20% equity or are you
putting at least 10% down on a purchase?
You may want to take a serious look at using a Pay
Option ARM. We already discussed basic ideas about
appreciation, but let's look at an example of how this type of
mortgage can send your cash flow through the
roof!
Let's say you have a duplex worth $200,000. You currently owe
about $140,000 and you are paying 7% for a P&I (principle
and interest) payment of $931.42. We will assume that the
T&I (taxes and insurance) is approximately $500 a month and
that you get about $1800 a month in rent. This gives you gross
cash flow of $368.58. Not bad.
Now let’s look at this same example using a Pay
Option ARM! Using that same loan amount with a payment
based on 1% gives you a payment of $450.30! When adding in the
taxes and insurance, your cash flow jumps to $849.70!!! You
have just DOUBLED your income on this property! Actually MORE
than Doubled!!!
This is a simple example but is shows the power in using
Pay Option ARMs! If you refinanced 4 property
similar to this, you could add almost $2000 to your monthly
income! How much of a difference would that make to your
business?
In addition to the extra cash flow they you will get look at
some of these other benefits:
-
If you have a vacancy, how would it
feel to know that your holding cost during that time is
33%, or more, less than what it was
before?
-
If you have a repair that pops up out
of the blue, as they always do, how would you feel knowing
that the expense won't kill most, if not all, of your
profit on the property for the
YEAR?
How would you feel once you knew that you
had the cash flow cushion to be able to hire a professional
manager to take over day to day operations while you spend more
time finding more deals?
The possibilities are endless!
I am not even going to mention the tax benefits!
;-)
Be sure to check out our other real estate
investor loan products!
To Greater Profits!
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