Loan Terms and Cash Flow

[William A.]

The strategy I am thinking about implementing is to buy rental properties,  and then utilize the cash flow to buy additional properties.    Is there any reason I would want any other loan term rather than a 30 year fixed rate?   I have read real estate investment books that talk about paying down the principle as fast as possible.  This seems counter-productive to me,  as it seems the cash flow would be better utilized as leverage for additional properties.   Am I missing something here?

[Anthony Dooley]

What you are missing is risk. You cannot get foreclosed on a property that is paid for. You can however, be foreclosed numerous times if you are over-leveraged and you have vacancies, major repairs, or other unforeseen emergencies. You cannot refinance if your credit is bad from late payments or foreclosure. Borrowing money is riskier than cash because if it all goes to crap, you still own the bank. I'm not saying don't borrow money, but use it cautiously.