DIARY ENTRY #8
House Hack Diaries
Fly too close to the sun, get burnt.
At least that’s what the Greek parable of Icarus teaches us. He could fly, but his wings were held together with wax. When he got too close to the sun, the wax melted and… you can probably guess what happened next.
Getting an adjustable rate mortgage (ARM) is a lot like flying with wax wings. You lock in a lower interest rate for a set period of time, then the rate adjusts based on the market.
An ARM can lower your payment and help you save money today. A fixed rate locks in your costs for the long term, creating certainty. This is the dilemma all real estate investors are facing in 2026, in an environment where a few tenths of a percentage point can make or break a deal.
Are adjustable rate mortgages worth it?
The case for ARMs over fixed rates
I’ve never had a fixed rate mortgage before. As crazy as that might seem, I’m of the opinion that the upside of an ARM is worth the risk:
Lower initial interest rates: Earlier this year, I was quoted 6.2% on a 30-year fixed mortgage and 5.8% on a 7-year ARM. That means immediate monthly savings and improved cash flow on rentals until the adjustment period begins.
Interest rates don’t always go up: “What if interest rates go up?” is the biggest argument against ARMs. We act like rates will inevitably rise, yet the truth is that no one has a crystal ball. Just as rates could go up, it’s equally as plausible that they could stay the same or go down.
Refinancing is part of the playbook: Many investors use ARMs with the expectation that they will refinance before the rate adjusts. Rates may move up or down, but a multi-year runway gives you optionality. If the window opens, you can lock in a fixed rate or reset into another ARM and keep the savings going.
Across four house hacks, I’ve had seven mortgages (due to refinances), and every one of them has been an ARM. The only time I can honestly say that I regret not locking in a fixed rate loan was in 2021, when I got a 2.3% 7-year ARM rather than a 2.8% 30-year fixed.
Yup… that was really stupid in hindsight.
With that said, that condo has built significant equity, which we’re planning to capture by selling the property. We would’ve done this regardless of rate, so I’d say it was still worth it to have had seven years of stronger cash flow.
Start with the end in mind
Will you even own the property long enough to hit the adjustment period?
This question goes a long way in deciding whether an ARM actually makes sense for you. By having an exit plan before buying, you’ll be able to assess your risk and decide what’s best for your situation.
For me, the current answer on any given property is “no.” I’m in a growth phase where I can sell existing properties and use the equity to trade up.
You might find yourself in a different situation, which requires a different approach. If you’re not sure what your next house hack will look like, these are some good rules of thumb to consider.
Value-add properties
Maybe it’s too many hours of HGTV growing up, or maybe it’s just my personality. I love transforming houses and restoring them to their former glory. If you’re like me and enjoy doing value-add house hacks, ARMs are a great way to keep mortgage costs lower during renovations.
Two popular strategies that value-add house hackers employ are live-in flips and live-in BRRRRs (buy, rehab, rent, refinance, repeat). In either case, your exit strategy would take less than five or seven years, which are the lowest available ARM options.
If you complete a live-in flip, you can sell after two years with no capital gains up to $250,000 or $500,000 depending on your marital status. They don’t even have to be consecutive– it just needs to be your primary residence two of the last five years. That timeline almost always comes before an ARM ever adjusts.
When it comes to doing a live-in BRRRR you’ll also benefit from an ARM’s lower interest rate. That means a lower monthly payment while you’re actively forcing equity and keeping more dollars in your pocket to allocate towards the renovation itself. Once the work is done and it’s time for a cash-out refinance, you can either roll into another ARM or lock in a fixed rate if you plan to hold the property as a rental.
Why not take the better rate?
Long-term rentals
When the music stops, you don’t want to be caught without a chair. Locking in fixed rate debt is the easiest way to avoid that outcome.
Even so, ARMs can make sense for buy and hold when the gap between a fixed rate mortgage and an ARM is significant enough for you to roll the dice. At that point, just know that you’re accepting a very specific set of risks:
Future interest rates are unpredictable: It’s impossible to know what the future holds.
You can refinance into fixed rate debt later, but with a caveat: If you want to refinance out of an ARM, into a fixed rate loan make sure you do it before you move out of your house hack. Once the property becomes a rental, refinance pricing shifts to higher investment property rates.
As long as you understand the risks, an ARM is still a viable option here. It’s up to you to weigh the upside and downside.
Are ARMs worth it?
You’re playing with fire when you opt for an ARM.
When you know how to harness them, they can be an amazing lever to pull. If used intentionally, ARMs can save you money from month-to-month before the adjustment date. Without a plan, you’re setting yourself up for difficult future decisions.
For me, the risk is worth the reward.