Should I expect to cash flow when using a 15 year mortgage?

[Nick Stango]

I want to buy a duplex but went to use a 15 year mortgage but it's hard to cash flow with a 15 year mortgage. Should I just be ok with the equity growth?

[Doug McLeod]

Depends on your goals, market, and risk tolerance.  

If your goals are cash flow and appreciation with a 5-7 year time horizon, no need to pay down loans faster.  If you are looking to use equity pay down as a savings vehicle over the medium term with higher cash flows longer term once the loan is paid off, then you may want the accelerated payments.

In the local markets I'd buy in, no 1-4 unit I've evaluated would cashflow with a 15 yr mortage.  In a market where rents are 1.5-2% of prices, then maybe it works.  But not at .9-1.3% rent/price.  Only one of my SFRs is a long term keeper.  The others I expect to sell or 1031 in 3-5 years. 

Some feel it is less risky to own free and clear as soon as possible (eliminate risk of default/lender foreclosure and have increased cash flow - but lots of dead equity).  Others feel it is less risky to maximize leverage - highly leveraged property is less attractive to lenders considering foreclosure, divorce lawyers, and other litigious types (less of own money/equity at risk, still some cash flow, and much less dead equity sitting around).