Some of you recently helped out in the

thread I posted a couple weeks ago about my business partner and I buying our first property, a duplex, for 212k. We close in August.

We now are trying to decide what mortgage option will be best for us.

He has about $22k of capital and I have a little over $50k. Our take home after taxes and 5% to 401k's is about $2,750/mo a piece. Neither of us currently have any other big unusual monthly expenses. We will likely both be promoted within the next year to increase our take home to $3,400/mo, and both of our salaries are likely to continue to grow as we are just starting our careers.

We expect only minor up front costs with the duplex to rip out a bit of carpet and add a small wall, and our closing costs should only be about $1k. We would also like to add a bathroom to at least one unit, possibly both, which we do not have an estimate for yet.

We plan to hold the property for at least two years, living in it for one year, and then renting it. We expect rent to be at least $1350 per unit. While we live there, we will have a 3rd roommate in our unit paying ~$450, which will give us income of $1800/mo. We may hold long term, we just don't really know at this point.

They will pay water/electric and we will pay gas, which our high estimate is $200/mo on average. Taxes $500/mo.

If I am missing something, let me know. Here are the mortgages we are considering with estimates:

FHA3.5% Down ($7420)

$204,580 (Base Loan Amount)

$3580 (FHA Up Front Fee)

$208,160 - Loan Amount

4.25% Rate

$1024.02 - Principal & Interest Payment

$234.18 - Monthly Mortgage Insurance

**$1258.20** Payment (not including taxes and homeowners insurance)

Conventional20% Down ($42,400)

**30 Year**$169,600 Loan Amount

4.625% Rate

$871.98 - Principal & Interest Payment

(~$227 principle, $644 interest in first two years)

**15 Year**3.75% Rate

$1233.37 Principal & Interest Payment

(~$727 principle, $505 interest in first two years)

What do people think about an FHA? It would free up capital to add the bathroom right away, and possibly make another investment, but is it worth it?

Between the 15 year and 30 year, there is a difference of $361/mo, but we are getting $500 more each month in principle. Am I thinking of this wrong, or is a 15 year essentially giving us a 38% ROI verse a 30 year? (12k additional equity in 2 years for $8.66k additional payments.) I'm not sure I am thinking of this right.

What about ARMs? We didn't really look into them much, but if we sell in less than 5 years, would they be the best option?

Thank you for any help! The offer letter thread really helped us, so again, it is greatly, greatly appreciated.