Re: Buying house, interest only loan the way to go?
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Im currently a sophomore in college and at the begining of junior year I plan on putting a down payment on a house and renting out two rooms. I will probably be selling the house in 3-5 years since ill be out of college. I have heard that getting an interest only loan is better for short term so the money I will make will be just what the house appreciates in value. Any info or advice on this would be helpful. I still have to do a lot of research before I go further into this because I am very new to this and have recently been winning a lot of money and now want to invest it into something.
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Buying a house for a short-term hold period is probably a bad idea unless you can get the house for about half of the fair market value. Also, there is no guarantee that your house will appreciate. That kind of thinking is what all the Miami, Vegas, DC, etc. speculators thought right before they went busto. Second, you haven't considered the transaction costs, which are extremely high in RE, and will eat whatever appreciation you can get in five years anyway.
Third, I don't know what your credit and reported income are like, but honestly being a sophmore in college that plays poker for a job, I doubt that you're a great candidate for a loan. You could maybe get a no doc loan, but I suspect that you'd be paying about 8.5% or more, which will likely make renting more attractive cash flow wise. Not to mention that there is basically NO WAY in hell that you'll get out of having to put 20% down. You're probably better off just putting that 20% into a mutual fund or something.
In sum, your idea probably isn't going to be very lucrative. I wouldn't suggest it at all.
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