Is it terrible to do interest-only???

PLESE HELP!?!?!?!?!?!?!?!

I know a guy that is VERY motivated to sell a house. Here is the deal:

Amount Owed: $0
Market Value: $71,000
Asking Price online:$78,000
Repairs: $5000 (AC/Carpet/Applainces)
MY Offer: 64,500 (includes all closing cost & $3K repair allowance)

Here are my questions:
1.) Do you think this is a pretty good deal?

2.) If I get this house I will have to finance through a bank. With interest rate climbling, should I look into interest only loans? What are the risk???

Thanks in advance for your help you are GREAT!!

I am getting the house


What is the exit strategy? Buy-and-rent? Fix-and-flip? Keep and live in…?

From your numbers, you’re basically paying retail – House is worth $71K, it needs $5K in repairs and you’re paying $64.5K…that leaves you about $1,500…

Is there a higher ARV in the equation?


I am getting the house

Good luck!!! :o

Well the exit stragedy is to RENT. I know that I can put it on section 8 and get atlest 900 for is since it is a 4 bedroom. I have an agent working in the area and she has a list of possible renters.

The main thing I am worried about is the financing and the best type to use. My credit is pretty good, but with rates up I know my note will be higher than I would like. Should I stay clear of interest-only loians?

You mention the amount owed is $0, so is there any way you can negotiate with the seller to have them carry some/most/all of the financing? This would cut out a LOT of garbage fees and whatnot, plus you could probably get better terms.

There are times when every single loan program makes sense. There are times when any particular loan program does not make sense.

I/O loans make sense when there is rapid appreciation and your holding the property for a short period of time (defined as the period of equal to or less than the initial rate lock in period). So for a 5/1 I/O loan that has a fixed rate during the first five years if you plan on getting rid of the property in 5 years or less then it can make sense if there is rapid appreciation during that time. The question is how confident are you in the appreciation of the property during that time?


Keith is absolutely right. This is NOT a motivated seller, although he seems to have found a motivated buyer. At $69,500 (purchase price plus repairs), you’d be paying a whopping 98% of retail and that assumes that the market value is correct.

If this person were really motivated, you’d be buying this property for $35,000, not $64,500.

Moreover, this is a loser as a rental. With a gross rent of $900 per month, you’d be losing about $60 per month on this property. Not terrible, but the purpose of rental properties is to MAKE MONEY.

Personally, I’d pass on this “deal”.



Wow, if going that low means he is a motivated seller then he is DEFINITELY not motivated. Do people actually go that low on the price? Have you had any luck finding those “motivated” sellers? I thought I was pretty close on the numbers, but I guess I have alot to learn. Wow!!

Yes, I was serious. How could you possibly define someone as motivated when they’re asking retail for their property? I never pay more than 70% of the retail value and usually pay far less than that. Someone who is “motivated” is desperate to get rid of their property and will do anything to get rid of it. Disgruntled landlords often fit this profile and will “do anything” to stop the pain. People facing foreclosure; estate sales; people with two houses; people getting a divorce; and people who have lost their job are also excellent sources of discount deals. REOs and foreclosure sales are other sources of discount deals.

In most areas, it is very difficult to buy a property at retail and rent it out at a profit. This certainly appears to be the case in your area.

Get out there and find a real deal!!!


Yes people do go that low.I closed on a house in Indiana on April 17th That I payed $34k for .Retail value was $90k - $100k depending on quality of rrehab.I had a local realtor stick a sign in the yard “For sale AS-IS / WHERE-IS” for $69k until I could get to do the rehab.(I live in florida) Low and behold Im closing on it on Friday Sale price $58k and all I did was spend $12k on airfare landscaping and taxes and realator commission and a little misc.58 -12-34.So $10k and about a weeks worth of work and over 3 months.Im not making a killing but if we could do a few more of these a month instead of a year well yes then we would be making a killing.Point is .Its happening everywhere in the World. Like mike said dont be a motivated buyer .There are toooooooo many motivated sellers out there .Especially now.We are in a buyers market right now in just about all areas of the US take advantage of it.Remember you set your profit level when you purchase Not sell a home.Cause once you close its all out of your pocket from there so dump it fast or rent it fast to minimize the bleeding.

most of my properties are IO.

if they go up in value, i’ll either refinance or sell. and if they don’t go and don’t cashflow, i’ll sell too.
no point in getting a 30 yr fixed if you’re not going to hold onto it.

I agree in principle to this statement but would like to offer the following as a disclaimer to this logic.

There is a financial ‘break-even’ point to every type of transaction. Whether it’s the question of ‘is it better to pay off debt or use that money to invest’ or ‘is it better to financing 100% of the property or only 80%’ etc. You have to just crunch the numbers to see under what circumstances you are on the right or wrong side of the break even point to decide which is the better decision. There are no right or wrong loan programs. The only thing that changes is whether you are on the right or wrong side of the break even point based on your own parameters for that transaction.

I’ve used I/O and 30 yr fixed depnding on the situation. More recently the spread between those two products has been very small so I’m willing to pay 0.25% more and get the 30 yr. fixed, but these are also properties I have a longer time horizon with.

Use the loan that makes sense for your deal, cash flow siutaiton and exit strategy