You must first consider your hold period.
How long do you intend to hold the property? Given the ups and downs of market trends, it is a good idea to review your financial position with any property every 2-3 years. Therefore, you should be selecting a loan for the benefit of the first two or three years. If your position is still strong, it may be a good time to refinance the property after 3 years. You will have the option to capture and leverage the appreciation or secure a longer term loan at a lower loan to value.
Second, multi-family residential loans are on the higher end of the lender‘s pricing model due to the risk involved with recovering a property in default. Here are some things to keep in mind when evaluating your options.
Be aware that any fixed rate loan will be substantially higher than you will see on a primary residence. Unless you choose to pay a discount point to buy down the rate, it is better to stay with a shorter term ARM loan, which will have a lower rate creating greater cash flow.
Cash Flow is King when it comes to selecting a loan for a couple of reasons.
The more down payment that you can make, the lower the interest rate and the greater the cash flow.
The second reason is that when buying a new multi-family property, there can be turnover in tenants in the first few months of ownership. If your loan has a low minimum monthly payment, you can handle the vacancies that may occur from time to time without having to dig into your pocket to make a payment. If you experience low vacancies, take the monthly income and reinvest it!
Your profits then become exponential.