15 Year or 30 Year Loan? (Cash flow and passivity is the goal)

4 Replies

Hey BP Familia!

I have a quick question. I am between a 15 year note and a 30 year note for a buy and hold rental. 

a.) 15 year loan PITI + HOA = 1587 at 3% interest rate. (Principal pay down portion is $790) with $37k out of pocket

b.) 30 year loan PITI + HOA = 1252 at 3.875%. interest rate (principal pay down portion is $283) with $26k out of pocket

To give context, I currently own my primary residence worth 290k and I owe 240k its a 3.37% interest rate. I also have one other rental which rent covers PITI Plus $150/month, this is worth $275k and I owe $153k on it with a 5% interest rate.

Which product would you recommend I take if the goal is to make life as convenient and stress free as possible? My two thoughts were to either do the 15 year loan and that would be paid off when I am 42 (I am 27 years old now). Or to do the 30 year loan and take that 300-400 of positive cash flow Plus my personal savings to pay down my other rental then pay off the new one once that is cash flowing fully.

I'd love to hear your professional recommendations and I know leveraging more and not paying down principal is an option but with my goals and risk tolerance, I'd much rather have 3 paid off properties making 15k each so I can have more time and options to keep growing the portfolio or taking time off! Thanks!

@Shane Gaboury

Just my personal opinion but when you can secure a 30-year fixed loan against a quality property under 4% I view that as an asset not a liability.  My own personal investing philosophy is to keep those loans in place as long as possible and deploy the additional cashflow into more rentals or other investments which would return much more than the 4%.  Either way good work and keep cranking!
 

Originally posted by @Scott Dixon :

@Shane Gaboury

Just my personal opinion but when you can secure a 30-year fixed loan against a quality property under 4% I view that as an asset not a liability.  My own personal investing philosophy is to keep those loans in place as long as possible and deploy the additional cashflow into more rentals or other investments which would return much more than the 4%.  Either way good work and keep cranking! 


Totally would take the 30 year loan. If you are looking for cash flow the longer your can spread it out and under 4% I’d be all over it. 

 

ALWAYS 30 year! You can choose to pay more if you want. But interest rates and payoff and all that other financial stuff aside, when your hot water tank goes, you'll be glad for that lower monthly payment for a few months. 

@Shane Gaboury I'd go 30 as well.. your tenants are paying the interest anyways.

Also, who did you get a 3.875% from for a 30 year recently in Virginia?! I just locked in yesterday for a property and the lowest I could find was 3.99% without paying a crazy amount of discount points.

Updated about 2 years ago

I mean I received 4.99%