20 Year vs. 30 Year Mortgage?

Question

So, I'm looking into my options for purchasing a rental. When it comes to financing I don't know if I should pick a 20 year mortgage or a 30 year mortgage. Everywhere online and on youtube tells me to get the 30 year mortgage because "cash is king," but in my case, the 30 year mortgage will only get about $200 extra dollars a month in cash flow (also people really only compare the 15 vs 30 year mortgages). And the arguments for a 30 year mortgage go on and on, such as flexibility, my money won't be dead money stuck in equity, etc.. However, people close to me that currently invest in rentals have told me to stick with the 20 year mortgage, arguing the extra cash flow really isn't that much, and that I'm closer to reaching the point where the rental has paid off it self and the rent I'm collecting is essentially all net. Any thoughts on this? The rent for the property will also be able to cover either mortgage, I guess it's just a matter of extra cash flow.

Karl McGarvey · Answer

Theres alot you can do or save for with $200 a month extra (like another down payment!!!) I agree, cash is king. In the end you can easily pay a loan down early.

Jerry Padilla · Answer

@Charles Liu

I agree with others..... The issue down the road can become your DTI’s and slow down your investing. If you have high income, and low DTI’s it may be fine and not become an issue.

Blake Garcia · Answer

@Charles Liu

I personally do the 20 year on mine. I am about to the point with apartments that it will be too tight for my comfort so I will be switching those to 30 going forward. The upside to the 30 is you have the option to pay extra principle to shorten the loan, but you have the flexibility to pay less during a vacancy or improvement phase.

Russell Brazil · Answer

All depends a lot on your personal financial situation. If the cash flow monthly is inconsequential to you, get it paid off quicker.  If that amount is not inconsequential, spread it out to increase the cash flow.