Investment property loan

[Pete Tam]

Guys,
I would like to get your ideas on investment property loan. Do you guys recommend to get 30 yrs or 15 yrs of loan with 20% down payment for property like 160-190K.

What kind of calculation to consider to evaluate loan yrs.

Thanks,

[Matt Devincenzo]

Originally posted by Pete Tam:

Little curious to know, if you are planning to invest in hold and rent kind of property, isn't it good to get 15 yrs of loan so you don't pay too much interest and free your property by this time.

That is one way to look at it. The other is that with the 30 year yes you pay more interest but have more CF today. that CF allows you to actually build up to more properties which also CF so you'll end up coming out ahead.

Also nothing is stopping you from paying down a 30 year loan in 15 years. So you can pay down the property faster if you choose later, but if you have a 15 you can't just pay less in any month so that keeps you free-er to adjust how you use that CF.

Finally a dollar today is worth more than a dollar next year (inflation). So if you borrow at 5% and are making 10% you are best served extending that payment out as far as possible so you can keep as much of the more valuable dollars today so you can reinvest that money.