There are real estate investors who are in it for the long haul, buying real estate and keeping it in their portfolio for years, accruing the long term appreciation they seek. Others prefer to flip real estate buying undervalued properties at a bargain price, rehabilitating them then quickly selling for a profit. Yet, is there an in between? And if so, how do such investors prefer to finance their acquisitions for say three to five years?

Mortgages for real estate investments come in two basic types, adjustable and fixed. For flippers, it’s often a very short term bank or private loan that provides the financing. The rate is less of a concern than it is obtaining financing in the first place. And whatever the rate, it doesn’t last very long as the property is quickly sold. For long term holds, a competitive fixed rate is the option. Adjustable rates, by their nature, adjust based upon an index and a margin. When the index rises, so too will the future interest rate. That’s why getting a competitive fixed rate when holding property is preferred. Yet there is one other option.

A hybrid mortgage offers initial interest rates that are just a bit lower than a fixed and most do not require any discount points, inflating the cost of financing. A hybrid is fixed for an initial term before morphing into an annual adjustable rate mortgage. For an investor who plans on keeping a property for say three, five or seven years, a hybrid might be the preferred choice. Hybrid loans can be fixed for an initial three, five, seven and even ten years before the adjustable feature kicks in. Savvy real estate investors who plan properly can take advantage of the lower rate hybrid while still owning the stability of a fixed rate mortgage.