• is trying to avoid negative cashflow in the early years of an investment,
• plans to flip the property,
• has other uses for the cash which would be paid as principal, or
• is expecting high levels of property appreciation.[-]
The primary risk to the investor is being left with negative equity if the market value of the property decreases, since no principal is paid during the interest-only period.
The Author: Chris Smith is a real estate investor, founder of an online reference for investors and real estate professionals and has published articles in Corporate Finance Magazine, Euromoney, and the Business Journal Network. More about Chris Smith.
