Amortized loan or interest only for buying a rental property

2 Replies

I am currently developing an cash flow model and would like to consider the impact from cost of conventional finance. What is the impact on cash flow, down-payment required and NOI, between these two financing options?

it depends on the length of term how much it would change your payment,  assuming the same interest rate. I would recommend against interest only. If you went with a 100,000 loan @ 6% interest only your payment is $500 a month. If you went 100,000 6% 30 year it's $600 a month. I would recommend finding a deal that will cashflow with a 15 year amortized loan, but that's just me. I think it's hard to find institutional interest only loans also

Originally posted by @Jeffery Waicak :

it depends on the length of term how much it would change your payment,  assuming the same interest rate. I would recommend against interest only. If you went with a 100,000 loan @ 6% interest only your payment is $500 a month. If you went 100,000 6% 30 year it's $600 a month. I would recommend finding a deal that will cashflow with a 15 year amortized loan, but that's just me. I think it's hard to find institutional interest only loans also

 Thank you Jeffery. I agree that an amortised loan is more effective as it will also reduce the principal amount owned.

With regards to financing my business, I currently own a property outright as a personal asset and look to take out a securitised loan / release equity from the property in order to financing investments made under a legal entity.

What sort of lending product should I be looking into and how can I use my personally equity to finance the business?