30 year loan versus 15

[Wayne Connell]

I own two properties, (one was bought and one we built) both are duplexes.  Everything I listen to and most of the forums on BiggerPockets it seems focus on 30 year mortgages.  However, in my area (central Nebraska) I have yet to find a lender who will loan on an investment property for anything over 15 years and 10 years is preferred.  I have had a couple of lenders says they would loan up to 20 years in specific circumstances but most will not say what those circumstances are.  I have been to approximately 8 banks in our area and with the exception of two national/regional chain banks, the others are actually locally owned banks.  Another thing is that most any of the properties that I find will barely make the 1% rule and I have yet to find one at 2% or one that each door will cash flow at $200 as suggested, at least on a 15 year note.  

My brother and I (we are partners) generally view property as a savings account. For example, the first property (duplex) we purchased we paid $116,000 for and it rents for $650 per side or $1300 per month (this is the high end for the area). It is on a 10 year note and with PITI the payment is $1254 per month. We pay for any maintenance out of pocket as well as vacancies. However, we look at it as over the 10 years, even if we had to put $200 a month into the property (for Cap X expenditures, lost rent, maintenance etc.) that at the end of 10 years we will have a property that is worth $124,000 plus. In other words we contributed $24,000 to get $124,000 plus.

I guess my question would be, other than private financing or owner financing (both options I am exploring), how do others deal with the length of the loan? Especially to find and secure property that will cash flow at the 2% rule or $200 per door as suggested on this site. I am not in a position to drive to out of state locations repeatedly to look at property, and if I had to hire a property manager it would drastically increase my costs on a 15 year loan. Also, I own my own home and my wife loves it so buying a multi-family home on a FHA loan or something similar and living in it is out of the question. Any feedback/advice would be appreciated.

[Steve Vaughan]

30 year loans are fannie-backed products.  Have to find an originator that will sell to the secondary fannie market (which is where like 90% of residential mortgages go), not a local bank that holds loans in their portfolio.

I like 15 yr loans, but I am old and a few hundred bucks a month doesn't matter anymore.  The rates are way lower and they amortize down fast as heck.  Got a new one in Sept and almost half my payment is going towards principle already.

So this isn't a which is better comparison, it's a how do I get a 30yr loan with a partner question.  Maybe it's the ownership structure, but ether way, you need a lender that sells their loans to fannie/freddie @Wayne Connell If you own in an LLC, that's the issue. You've traded 'asset protection' for limited financing options.

If you don't care about getting spam e-mail the rest of your life, try lending tree or quicken/rocket mortgage maybe just to see.