Rental real estate strategy with 3k monthly savings 15 year loans

[Jorge Leon Jr]

I wanna pick some brains here... .. Im saving 3k monthly I have 1 single home property on loan cashflowing 200$ after expenses on 15 year loan.... (self managed) ...

My goal is to Be financially free 15 years down the road(or sooner) which is why i put this first property on 15 year note ..

My main concern is should i go 15 year loans / equity loans / 30 year loans / brrrr method ... for sure though i am a buy and hold mentakikty no flipping here i run/ own a restaurant dont have time for that

I would really like to have a number of loans paid off withing 15 years (15,000$or more cash flow)... I know the term dead money using shorter terms but i do not mind having loans paid off earlier vs 30 year loan even if it means less cash flow i do not need to live off of it now if it means loans getting paid sooner

Again i am new to the game spending lots of time on bigger pockets and listening to podcasts daily ,, go easy on me :)

[Joe Villeneuve]

15 year loans lose cash flow...and lose money since the source of the money that shortens the loan comes from you.  This is a really, really basic math formula.  where I find many don't understand is what qualifies the plus/minus numbers.  

Cost is negative...it's that simple.  The confusion is in the "cost".  Interest charges are not cost by virtue of being an interest charge.  They are a cost based on who pays to interest charge, and are a cost ONLY to that person.

If you have positive CF, meaning the rent is paying all the expenses (including the mortgage/interest payment), then the REI isn't the one paying the interest charge...the TENANT is. That's their job. When we help them, by paying mortgages off faster than we need to, we are now helping the tenant buy the property for us...and helping them pay the interest charge in the process.

When we have negative cash flow, we are REALLY paying a lot more than needed for the property.

What does the property cost us when we buy a property?  Whatever comes out of our pocket.  The minimum is usually the down payment.  Anything we add to that, is money WE are spending unnecessarily.  If the only money that came out of our pocket was the DP, then that's ALL the property cost us to buy.

We have to recover all of our cost before we made any profit.  The less we spend on a property, the sooner we start making a profit.  If I had a property that the total cost was $100k, and I put up a down payment of $20k, and that property had $500 CF/Mo ($6k/yr), I would start seeing a profit after 40 months, and I would have paid only $20k for the property.

On the other hand, if on that same property, I had a 15 year mortgage, but my CF was reduced to $200/month, it would take me 100 months to recover my money...and start making a profit.

3 years and 4 months vs. 8 years and 4 months.  

OK. You say "I have the property paid off in 15 years though", and I say "so what".  Why?  Liquidity...and the power of compounding future investments with the 30 year mortgage, that you don't have with the 15.

Example:

30 year mortgages - 

3 years 4 months, CF = $20k accumulated.  Take that and invest it into the next deal...just like the first deal.  This means you now have $1000/month, and only 20 months (1 year and 8 months) to accumulate the next $20k.

1 year and 8 months later (5 years total), take your new $20k and buy another property just like the first two.  Now you have $1500/month ($18,000/year).  So, in 1 year and 1 month and a few days (total of 6 years +), you can buy another property...again, just like the first 3.  You now have $2000/month ($24k/yr).  So in 10 months ....if you extrapolate this out to 8 years and 7 months, CF = $4,000/month ($48k/year)

15 year mortgages - 

8 years and 4 months, CF = $20k accumulated, buy property #2 and double your CF,,,$400/month, and...need I go any further?

$4000/month vs. $400/month....????