Do you base decisions on 15 or 30 year loan

2 Replies

Hi all

I’m what you’d define as a newbie whose looking to make his first purchase very soon. A key financial goal is to have positive cash flow. Do you recommend to go with a 15 or 30 year loan when running the numbers?

I've been using 15 year in my analysis of single family homes in the area as a comparison. Either the price I need to pay must be much lower than the asking price on MLS or the rent needs to be higher than the market, or I need to lower the costs I've assumed? The cost items that are not fixed assumptions are: vacancy 10% of yearly income, maintenance 4% of income, CapX 4% of income.

15 or 30 is the question?

Thanks.

Hi, Scott!  First, I would consider your risk tolerance and your mentality about investing.  Does leverage and debt keep you up at night, or do you sleep like a baby?  With how rates are currently, I see little to no benefit to shortening the loan term from 30 years.  With how low interest these rates are, it makes more sense numbers-wise to stretch out loan terms as long as possible and invest any additional funds instead of using them to pay down the loan.  If the idea of a 30 year mortgage gets you a bit queasy, I'd look into using a 20 year mortgage to run the numbers.  In this market, it would be very tough to find properties that cash flow well when financing was obtained through a 15 year mortgage.  Let em know if you have any other curiosities!

@Benjamin Piecenski Hi Ben, thanks that was helpful. Another question, we've been told to form an LLC. With that what type of loan do you recommend or can we get with an LLC? Can we get a standard 30 year FHA loan? I'm told also we are limited to the number of FHA loans we can get per person to 10?