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[boo7z]

Just wondering...I'm considering buying property in MB, SC and interest only loans are being pushed. If I intend to only hold the property for 3-5 years with the expectation of getting a good return, it sounds like a good way to "buy more house" then I could normally afford.

Also, any good websites on rental property investing? There is some good stuff on about.com, just wondering if anyone has looked into this recently.

thanks
bootz

 

[Phoenix]

Going interest only right now would be a HUGE mistake. Interest rates are going to be going up at a steady pace for at least the next year according to Greenspans generally cryptic notes. Even over a 3-5 year term you're looking at an interest only rate that will be higher than todays fixed rate.

Don't "buy more house" - just make sure you can afford the fixed price of what you want. The market is full of foreclosures and house for sale by people who can no longer afford their house because the interest rate has jumped significantly since they purchased them.

 

[Fatghost]

Listen to Phoenix. Don't buy "more" house. Get the best house you can afford in a comfortable, stable fixed rate mortgage. The most important thing you should consider is whether or not the mortgage payment will be comfortable for you - don't bite off more than you can chew.

 

[boo7z]

Thanks for the feedback.

I'm in an interesting situation...Right now I have very little debt and living expenses based on my job (on the road M-TH, expenses covered by company). My goal is to find a "maintenance free" rental opportunity primarily to be used as a tax shelter. Of course, a large appreciation over the medium to long term is what I hope for as well.

I never really did calculations on an adjustable rate mortgage - especially a short term one (5 years). A change in 1% (6 to 7) makes a big impact on the interest rate.

Whatever I intend to do, I need to find a way to reduce my taxable income. I'm thinking about contributing more to a 401k but I just switched employers and I won't be able to get a matching contribution for another year. That really chaps my ass!

Oh well... I'm not going to doing anything rash. My thought was that I'd find a place that would knock $10-15k off my income as well as be a nice vacation spot for a few weeks a year. I hate giving $$$ to the gov't!

 

[Fatghost]

Thanks for the feedback.

I'm in an interesting situation...Right now I have very little debt and living expenses based on my job (on the road M-TH, expenses covered by company). My goal is to find a "maintenance free" rental opportunity primarily to be used as a tax shelter. Of course, a large appreciation over the medium to long term is what I hope for as well.

I never really did calculations on an adjustable rate mortgage - especially a short term one (5 years). A change in 1% (6 to 7) makes a big impact on the interest rate.

Whatever I intend to do, I need to find a way to reduce my taxable income. I'm thinking about contributing more to a 401k but I just switched employers and I won't be able to get a matching contribution for another year. That really chaps my ass!

Oh well... I'm not going to doing anything rash. My thought was that I'd find a place that would knock $10-15k off my income as well as be a nice vacation spot for a few weeks a year. I hate giving $$$ to the gov't!

Look, if you're in a position where you have a lot of disposable income and can tolerate the risk, then using an interest only mortgage for a rental property might be a viable strategy. You didn't mention the details in the first post!

EDIT:

That said, a rental property might not really provide much tax savings...it will produce income as well as tax deductions and you could end up no further ahead tax wise than you were when you started. You should consult a qualified financial advisor to take you through all the options.

 

[Phoenix]

Thanks for the feedback.

I'm in an interesting situation...Right now I have very little debt and living expenses based on my job (on the road M-TH, expenses covered by company). My goal is to find a "maintenance free" rental opportunity primarily to be used as a tax shelter. Of course, a large appreciation over the medium to long term is what I hope for as well.

I never really did calculations on an adjustable rate mortgage - especially a short term one (5 years). A change in 1% (6 to 7) makes a big impact on the interest rate.

Whatever I intend to do, I need to find a way to reduce my taxable income. I'm thinking about contributing more to a 401k but I just switched employers and I won't be able to get a matching contribution for another year. That really chaps my ass!

Oh well... I'm not going to doing anything rash. My thought was that I'd find a place that would knock $10-15k off my income as well as be a nice vacation spot for a few weeks a year. I hate giving $$$ to the gov't!

There are other things you can contribute to (like IRAs) which will decrease your taxable income. If you're looking into rental real estate, that is certainly a good move. As an owner of a couple of pieces of rentals (half a 4 plex and a duplex), it is a sound financial move - but one that has a large degree of risk and will rapidly consume your extra money or your time in upkeep.

If you're looking at a vacation spot dump, you might want to look into timeshares and the like.

 

[Amused_To_Death]

It's a trap, don't bite. If the housing bubble bursts, you might end up owing more than your house is really worth.