Who’s wrong? Jay Strickler or Graham Stephen?

13 Replies

I love the polarizing opinions we have before us here. The bottom line is each investor needs to analyze their goals and decide what is best for them. I would be interested in finding out more about the reasons for each side's opinion, but the screenshots only show the headline.

I like the longer amortization because there's more cash flow to hedge your bets against things going wrong. Plus, with that extra cash flow I get I can grow faster and buy more real estate Quaker. More risky I suppose.

Again, if you can borrow $1 at 3% and then invest it and make 10%, why wouldn't you borrow?

Particularily if you're starting since you need to build cahs reserves quick.

@Ryan Behm

I am 100% on the 30 year bandwagon. I can always treat it as a 15 and pay off sooner but I can’t do the reverse.

I was actually shocked when I saw that BP article come out in my email this week.

Originally posted by @David Lee Hall, III :

@Ryan Behm

I am 100% on the 30 year bandwagon. I can always treat it as a 15 and pay off sooner but I can’t do the reverse.

I was actually shocked when I saw that BP article come out in my email this week.

made more sense when there was a bigger interest rate spread.. and on your personal resi I like 10 or 15 .. especially in high price appreciation markets were all that equity can save your butt in a time of need.. leverage to the hilt in a time of need means trouble.

 

Jay Stickler does not represent the opinions of the entirety of BP, in fact Im sure he is in the minority on this opinion.

@Ryan Behm

30 year makes more sense to me. The only con I see is maybe the ever so slightly lower interest rate in the 15 year.

I’m a bit more conservative though and think that a 25% deposit is nice because then monthly payments can be low in case something goes wrong.

I’m not sure how so many people can do the 3% down and feel comfortable with the sky high monthly. Maybe there’s something I’m missing.

People write controversial things to get clicks. ANYONE can write a BP blog or start a Youtube channel. There is literally no credentials required, which means someone with no experience or bad advice could shout it from either platform. 

Choosing a 15 year over a 30 year mortgage really comes down to interest rate. As @Jay Hinrichs pointed out, the spread isn't very big right now. In the past the spread has been larger. Generally speaking a 5 year or 7 year ARM gives you the best rate, then 10 year, then 15 year, then 20, then 30 year loans. Longer term is usually higher interest, but lately that isn't necessarily even true. If there is an advantage, it is small. So assuming very little difference in rate, there is no reason to not go with 30 year and you can always pay it off sooner.

Of course one other reason for a shorter term is forced pay down. Although you can pay down a 30 year in 15 years, if you have a 15 year, you must pay it off in 15 years. 

I like the lower payments that come with 30 year loans because I can maximize cash flow. That gives me extra cash to invest sooner. That is not where everyone is at in their investing career. If are not aggressively adding properties, there does come a time where people like to pay down debt. At that point, there is no harm in shorter terms and lower rates.

The right answer to this question isn't who is right or wrong, it is "depends". Depends on interest rate, depends on investing objectives and where you are at in your investing journey. 

I was both shocked and offended by such an obscene statement.  How could BP promote such blasphemy!  LOL I know this article doesn’t speak for BP.

If you choose a 15 year mortgage over a 30 year mortgage you are going to save 500-1000 every year on interest for every 100k you borrow, in exchange to loose thousands of dollars in cashflow every year for at least 15 years.  I think for most investors that does not make sense.  

Although I bet in hindsight many investors that blew their cash and refinanced their 30 year mortgages would have loved to have had the built in discipline that the 15 year demands.  

This is a no brainer for 99% of us, a 30 year is the way to go. 

Also remember that BP doesn't have an official position on much of anything. This platform is a collection of different opinions and strategies. You may find some strategies are more strongly voiced than others, but never take that as BP's official position or even as the right path in all situations. Two strategies can be the opposite of each other and both can lead to success. It is about finding the right path for you. 


The only mistake in real estate is not doing anything (my opinion).