Best Loan term when evaluating a deal?

[Erik Powell]

Hello all,

I have a question on what term to use for a loan?  I have heard 15 years with a Cash on Cash of at least 10%.  However, last night Brandon in his webinar used 30 years for his deal he analyzed.  Is there a discussion or some rules of thumbs on this at all?  I am a little confused and looking at a couple of deals that make no sense using the 15 years, but start looking OK at 30 years.

Thanks!

[Andrew Johnson]

Erik Powell Maybe start by asking the person who told you to use 15 years. I'd always take a longer term for the loan. If interest rates go up, I've locked in a low cost of capital. If they go down, I can likely refinance. And you get extra cash-flow and barring a pre-payment penalty there's nothing to stop you from paying extra principle. The only argument I could make for a 15 year mortgage is if the interest rate was materially better than a 30 year. It's been a long time since I've seen a big enough spread to contemplate it.