Thought interest-only loans were a scam until I ran the numbers on a rental property

I spent years telling people interest-only loans were basically just throwing money away. Then I bought a duplex in Austin last year and actually crunched the numbers with my lender. $280,000 loan at 6.5% interest-only came to like $1,500 a month compared to $1,900 on a standard amortizing loan. That extra $400 a month let me put cash into a new HVAC system and some plumbing fixes that were killing my cash flow. After the work, rents jumped from $1,100 to $1,400 per unit. Sold the place 14 months later for $340,000 and pocketed the full gain since my principal never dropped. Has anyone here actually used interest-only on a flip or rental and come out ahead?

2 comments

2 Comments

anderson.david1mo ago

Extra $400 a month let me put cash into a new HVAC" - did you factor in the property tax hit on that higher sale price?

margaret_williams51mo ago

Heard a buddy try this on a condo in Phoenix and the HOA fees ate up every dollar he saved.