Thoughts on interest only loans

[David J.]

What are your thoughts on interest only loans for buy and holds? I see the plus as more cash flow, but the downside of no principle paydown. My thought was that increasing cash flow in the growth stage of a portfolio would allow for a more rapid growth. You would also have the ability to elect an amortization schedule that fits your goals.

Once your portfolio reaches your target for growth/size, the cash flow could be applied to the principle to pay down the loans. Isn't the principle paydown just a forced saving account at the end of the day? Wouldn't you rather have the cash?