Shorter v. Longer Commercial Financing Term

[Christopher Brown]

I'm working on financing for my first CRE deal (~$2m self storage property). The acquisition is a cash flow play for me, and I hope to be able to put the cash into more SS properties.

I am wondering about the pros/cons of shorter v. longer term amortizations in CRE. Obviously from the near-term cash flow perspective the longer term and the lower payment is attractive. What other considerations are there? Tax benefits of the larger interest payments on a shorter term? Paying it off sooner, obviously, with a shorter term, but paying it off seems a long way off no matter the term. What else do folks pay attention to?

[Mike Dymski]

First deal = go with longer amortization

Cash flow play = go with longer amortization

Goal is to put earnings into more property = go with longer amortization

Longer term amortization benefits = flexibility, reduces risk, improves ROI/IRR, more tax depreciation per $ invested, rates are low right now

Likely just confirming your thoughts.  Short amortization and untimely balloons can lead to sleepless nights.