An interest-only loan lets you pay just the interest for an initial period, often the first several years, so your payment is lower but the principal balance stays flat. When the interest-only period ends, the payment jumps as you begin repaying principal too, usually amortized over the remaining term. Because no equity is built through paydown during that window, your equity depends entirely on appreciation.
Investors sometimes use interest-only structures to maximize early cash flow, or to keep payments low on a property they plan to improve and then sell or refinance before the higher payments begin. The risks are the payment shock at reset and the lack of forced savings from principal paydown, so the structure rewards a clear exit plan and punishes a hope-and-hold approach.