15 or 30 year for a 35 year old investor just starting out.

[Nicholas Misch]

Hello BP Family,

I am 35 and am just wondering if I should be considering 15 or 30 year mortgages. I have a goal of 5 properties in the next 5 years minimum and then hope to expand more rapidly thereafter and want to ensure I am planning for my exits and retirement as well as my current income.  Any advice would be greatly appreciated. 

Nick   

[Gonz Trevino]

You're in a phenomenal place!

A couple of things to consider... Ultimately the bottom line is how much your payment is going to be on your 15 year mortgage and how much your payment will be on your 30 year mortgage.

Lets give a scenario where a 30 year mortgage will cash flow you 500 dollars a month and a 15 year mortgage will cash flow you 100 dollars a month. Ultimately what is greater to you, the value of the extra 400 monthly or the value of having it paid off 15 years sooner?

Keep in mind that the extra 400 a month reduces your risk (you can have a bigger savings easier) in case of a large capital expenditure (roof, AC, etc). So 30 year is less risky. 

You can also use that extra 400 a month to reinvest into more properties. In 15 years that is an extra $72,000 in your pocket. Depending on your market, but here in Texas that could easily be 2-3 down payments at 20% for rental properties. Thus the higher cash flow gets you more properties.

Also, with our inflationary dollar, the value of getting a 30 year mortgage increases. You will pay the mortgage with cheaper and cheaper dollars every year that are easier to acquire. 

Keep in mind millenials are a group of youngsters who are starting to reach the age of having families and settling down. These millenials are renting in record numbers and not buying. This means that it is likely in the next decade that rents will be increasing at a faster rate than prices of homes will. So if you leveraged that extra 72,000 over the 15 years and got yourself 3  houses that rent appreciation will mean a lot more for you in cash flow than paying it off early.

All in all every strategy is viable... however I believe if you are frugal and save your additional cash flow to reinvest you are better off with a 30 year mortgage... especially since you are young!

Best of luck!