Buying house, interest only loan the way to go?

[ChromePony]

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200k * .80% = 160k

160k @ 30yr/7% = $1065/mo

Assume tax and insurance @ 4k/yr or 335/mo

about $1400/mo PITI.
This doesn't include utilites, which you would pay anyway.

$1100/mo in rents leaving you paying $300/mo. Can you get a 4th person to rent?
In 5 yrs the principle is $150,611. Depending on appreciation you have now gained about $9k of equity on your $40k investment. Not a bad return.

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First off, 25% over 5 years is not great, you can get that in a savings account.

Second this is much too optimistic. There will be maintenance costs, utilities, vacancies(?). Not to mention closing costs of ~3% on each end, thats 12k right there...

You will probably be relying on appreciation to turn a profit here and thats not the safest bet right now. It's possible that this could work out in you favor, but I'd be surprised if its works out better than a variety of other investments that are lower risk and less work.

Oh and if the point of this is to build build equity, please don't take out an interest only loan [img]/images/graemlins/crazy.gif[/img]

[Henry17]

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Renting is much better for me at the moment as well, mainly because I currently have a roommate so that cuts my rent and bills in half.

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Including the roommate in your equations is wrong. If you own a home you can also have a roommate who pays you rent and still splits the bills.

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The above calculation does not take into account if you will have any roommates paying you rent, so if you do, that may swing things in your favor.

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The US Tax code is not something I'm intimately familiar with but if he has roommates paying him rent that would increase, not decrease, his tax payable since he now has a new source of taxable income.

[mtgordon]

If slightly over 4% is 'not bad'. You can currently get a savings account that pays more than that. I'm guessing you could get a 60 month CD that would pay more than that. Sounds like a bad deal to me.

[Henry17]

The more I think of it I can't come up with a single positive for doing this. I did do something similar when I was in university but I was pretty much assured of at least 40% appreciation + the rental income.

You also have to think about the impact on the primary purpose of going to school which is to get an education. You'll have roommates that are also your peers and probably become somewhat friends. This has potential to cause issues since now you are their friend but also their landlord.

[mtgordon]

Owning a home does allow for a lot of tax write offs though...However you might not be making enough money while in school for this to matter...However if you're playing poker you might be.

[spex x]

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what i had i mind was something around a 3/3 or 3/2 around 200k. I have seen some nice ones around here for that price or less. I can put 20% down and have parents who have great credit co sign the loan. im not sure what kind of interest rate i could get doing that but i know they have nearly as perfect credit as you can get. renting two rooms at probably 550 a month/utilities included.

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Am I reading your posts wrong? It seems to me like you are really dead-set on doing this even though everyone on this board that knows what they're talking about says its a bad idea. Look, this idea will cause you heartache and headache if you do it. This is a bad idea that you haven't thought through fully. You need to seriously rethink your idea.