15 year or 30 year?

Question

what is your preferance when purchasing a rental property? I know 30 year increases your profits because your paying less per month but you will also pay more in interest on the other hand if you go 15 your profit is less but you get your unit(s) paid off 2x as fast?

Also what would you susggest for a first time rental owner? 15 or 30

David Krulac · Answer

@Luke Woods

As a beginning investor, I always felt that I should borrow as much as I could for as long as I could.  The first 5 deals that i did were all essentially 100% financed, and I tried for 30 years fixed.  Two of the deals one from a bank and one from a seller ended up being 15 year fixed, which i was satisfied with.

On the other hand of the last 67 properties bought only financed 1.

Dell J. · Answer

profit and cash flow are 2 different things.

Ali Boone · Answer

Depends on your goal. Are you more interested in cash flow (or in need of it) or does the idea of equity seem more appealing? Totally depends on what you want/need for cash flow. Either way you go is fine.

Luke Woods · Answer

thank you for the reply I was able to find a few more topics on this. So I am learning! Idk exactly what my goals are but I do know I want a paid for rental property(ies) by the time I retire from the Air Force or a few years after 16-20 years from now. I want the money I make from paid for rentals or even a few rentals that arnt paid for to supplement my pension.

Bill Gulley · Answer

The 15  year is about an .125 to .25 less in rate, but you have a higher obligation that plays on your ratios to qualify on other loans.

Take the 30 and you can pay any amortization you like to save interest.

Consider leverage as well and your long term goals, you may not want lots of equity in 8 years that you'll later want to tap into for cash. But, if you plan to hold long term and retire with no mortgage, you can consider amortizing the loan to fit your needs.

In 10 years you may want out of a property too, let appreciation be your profit without having to sell to get the money out of the walls from built up equity.

There is no right answer, but usually take the 30 or longest amortization and devise your own plan. :)

15 year or 30 year?

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