Thoughts on 10 year I/O in today's environment?

[Sean Bramble]

Hey everyone - I'm going under contract today on my first deal ever! Property is right outside of a Natl Park in CA, and we'd like to use it as a full-time STR/ Airbnb

I'm comparing DSCR loan options today (no DTI - DSCR is my only option), and notice that 10 year I/O options boost my cashflow, but am uncertain if this is better than your standard 30 year fixed. My goal is to scale as quickly as possible by investing in future properties, so I like the idea of minimizing equity/ principal paydown in the property for the sake of liquidity. But I also realize the macroeconomic environment - especially as it relates to interest rates - is very uncertain, and in 5-10 years time rates could be even higher than they are today. I would hate to be forced to refi at a higher rate ... but I'm also asking myself how much I'll really care at that point, bc I'll hopefully have many more properties in my portfolio by then ...

Anyone else out there who shares my goals of scaling quick and has weighed this decision recently? Would love to hear your thoughts. I'm a newb at this, so can use all the advice I can get! Thanks!

[Jonathan Taylor]

@Sean Bramble Interest only maximizes cash flow since you are only paying for the interest. This may allow you to grow faster assuming the difference in payments makes it worth it. The PPP is designed to prohibit you from refinancing too early. A bridge loan would be 12-24 months interest only as well but does not come with a PPP as strict as the 10yr I/O. If it works with your goals of the property, it allows you to stabilize the property and refi into a 30 yr fixed at no penalty. That is my assumption as to the use of a bridge loan in this scenario.

DM with further questions but I/O options are popular in this market right now.