The real estate investor and the interest only loan are a perfect pairing. The real estate investor looking to retain an investment for the short term can really benefit from the lowered investment of the principal payment. Especially in situation where the investor is improving the property and the value is certain to increase.
This particular borrower fully understands the risks involved in an interest only loan, and has spent the time needed to determine if the product is right for his investment needs. The real estate investor is a business person, not a consumer borrowing to pay for a place to live.
The short-term real estate investor or developer wants to keep his or her expenditures at a minimum during this investment period, saving as much of the expendable cash as possible for the actual renovation or preparation for sale of the property itself.
The less money spent on mortgage payments, or in the investors eyes, investment expense, the more money there is to actively and aggressively pursue potential buyers and increase the value of the property. This is good business, and good business is based on sound business decisions.
It is here that every consumer needs to stop and reevaluate their borrowing situation against that of the investor. A real estate investor is a business person. Their livelihood depends on their knowledge of the product they market, in this case real estate. Normally, a business person is not going to take a risk with their personal investments that the will take with a business investment. Why? Because the home they share with their family is much more important than a business deal, most are not willing to risk losing their home.
A risky investment for the consumer when speaking in terms of their home is not a good move. Taking the safe bet is a much smarter move on the part of the consumer, even if the interest rate is a little more, and the house is a little smaller. |
