Wrapping my head around 30 yr vs 15 yr loan

[Jon K.]

I was hoping folks could help me weigh the pros and cons of using one term over the other for a buy and hold investment. As I think long term about rehabs and refinances or even turnkeys when the numbers work I keep flip-flopping between the two. In my specific circumstance i do not "need" the cash flow. All profit after reserves for maintenance/cap ex/etc will rolled into new investments.

For the sake of the conversation let's say this was a fresh refinance on a BRRRR so we have 75% LTV. I know you have more cash in hand on a per month basis with a 30 year but with the lower interest rate of a 15 year your total profits would be higher. You'd still have access to the equity through a HELOC but then you're making interest payments via a variable rate to use your own money. At the same time with a 15 year your payments amortize faster which to me seems the equivalent of lowering expenses faster without effort.

I know this is all very dependent on individual goals and circumstances but what else may I be missing? I'm currently thinking that as long as I stiil have positive cash flow I'd be better off doing a 15 each time.

[Rich V.]

The 30 year is typically your best bet. With a 30 year, you can always pay the loan down quicker if you choose. If the property is vacant or the drops out a bit, you can just pay your normal payment. The 30 will give you that flexibility.

The 30-year will also increase your cash flow. In comparison to a 15-year. Brandon talks about this in his #AskBP podcast series. The link to the quick 5 min basics is below:

Ask BP: Podcast 63