15 year vs 30 year mortgage

[Travis Blake]

Looking at buying my first multifamily, but I'm debating on either a 15 year mortgage vs 30 year. I feel like with today's interest rate it makes more sense to do 20% down and 15 year mortgage. I understand the mortgage will be higher and take away from the cash flow. But wouldn't it be better to pay a little bit more each month rather paying all the interest over 30 years just to cash flow a couple hundred dollars. I'd like to hear what people think about that. 

[Don Konipol]

Ha ha.  Many interesting answers here - as always on BP.  Really these answers are PERSONAL - in other words it’s impossible to answer without knowing your risk/reward tradeoff, your personal financial situation, your anticipated income and expenditures for the future, etc, etc,.

Most quotes I’ve seen offer a lower interest rate for a 15 year mortgage.  So in terms of absolute cost the 15 year will be less costly.  Because the monthly payment will be larger the after mortgage payment cash flow will be less with a 15 year mortgage, despite the fact that the amount of interest paid will be less due to the lower rate and faster amortization. 

Another part of the equation is the ROI that you can invest the additional cash flow at.

Any advice anyone gives is based on THEIR risk/return criteria, not yours. 

Here’s mine.  I like 15 year because I can envision owning the property free and clear with significant asset value and significant cash flow in 15 years, while I have trouble envisioning 30 years.  Not very “scientific” but that’s just the way I think.  On the other side I’d want to accumulate an “emergency” fund asap to have the most important asset a real estate investor can have during a downturn - staying power. So these two are pulling me in opposite directions.  

Should you not be able to make a clear decision based on all the “information” we posters have postered, you can always do what I as a professional real estate investor, syndicator and fund manager has done - flip a coin.