I recently sat down with Chris to talk about how my strategy is changing halfway through the year. With rising interest rates, I’m evaluating my portfolio, new acquisitions, and risk differently than I was before. That’s why I got my first Adjustable Rate Mortgage and am looking into cost segregation for my multifamily properties.
- Listen to the podcast “#94: How Jenny Is Assessing Risk with Her First Adjustable Rate Mortgage” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
In the first half of the year, I bought several properties: a single family home in Pueblo and two multifamily properties in Colorado Springs. One of the multifamily buildings is in need of some TLC as far as management goes. Otherwise, it’s in great physical shape and was a turnkey building. My plan for the rest of the year is to focus on stabilizing the multifamily properties.
Why I Finally Got an Adjustable Rate Mortgage
When I closed on the newest fourplex, I decided to try an Adjustable-Rate Mortgage (ARM). I’ve previously sworn off ARMs as too risky, but I’m reevaluating them in light of the current market. I’m at a point where I have a lot of properties in my portfolio, which allows me to assess decisions from a portfolio position rather than from the perspective of just one property.
I have a strong equity position and solid cash flow across my portfolio. This made me more willing to take a small risk in order to get a lower interest rate. Since there’s a lot of room to max out management, increase rent, and institute a utility bill back, I feel confident I can boost the performance of the property. This makes me feel more comfortable taking out an ARM.
How Rising Interest Rates Are Changing My Strategy
I’m not confident that interest rates will drop, but if they do, I’ll be ready to pounce and refinance my ARM into a 30 year fixed rate loan. Otherwise, I’m going to work on stabilizing all of my properties and pumping up cash. As I take on larger assets, I want a larger cushion to go with them. My ultimate goal for the rest of the year is to make things safer across my portfolio.
Implementing Cost Segregation to Benefit from Depreciation
I currently own two fourplexes and plan on doing cost segregation for both. Cost segregation will allow me to frontload depreciation and get cash flow for my first year of ownership. I’m anticipating getting $30-$60K back in taxes, which can be used as another down payment or as a massive injection of cash flow.
Cash flow is hard to come by in this market, and cost segregation is a great way to increase it.
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I like to talk about my investing strategy and things I’m trying out because this is what our clients are also figuring out. If you have any questions or want help forming your own investing strategy, reach out to me for a free consultation.
Shifting Investing Strategies in a Changing Market
Podcast (colorado-springs-real-estate-investing-podcast): Play in new window | Download (Duration: 8:20 — 9.5MB)
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