SFR: Length of Mortgage . . . 15 years or 30?

[Randall Cornelison]

Hello all!  I buy SFRs to rent out.  All mine are currently on 15 year notes, and while I understand the fiscal benefits of paying off loans more quickly via a ten or fifteen year mortgage, I struggle with my desire for monthly cash flow.  Has anyone else dealt with this conflict?  On one hand, pay the notes off faster, less interest and woohoo on the day a house note is paid off.  On the other hand, renters are paying the notes so who cares, and a 30 year note would mean lower montly payments, thus a higher monthly cash flow, more houses bought more quickly.  What have y'all done with your notes?

[Joe Villeneuve]

30 years...no question.  Just follow the money.

You answered your own question...cash flow.  Let me add this to your thoughts:

1 - Who pays the mortgage?  The answer, as long as there is positive cash flow, is the tenant...so don't help them.

2 - What is "your" cost to buy the property?  The answer, as long as there is positive cf, is whatever comes out of your pocket.  The down payment, and any extras you pay for...so don't pay extra to pay off a loan faster.  All that does is add to the cost to you, and helps the tenant pay off your mortgage (buy the property for you).

3 - Whatever money you pay for, with your money, is money you have to "recover"  (through the cf) before you start making a profit.  The less that comes out of your pocket, at any time, the better.  Remember, just because you may have a longer pay period (30 years instead of 15), doesn't mean you are paying more for the property.  All it means is you have higher CF, and the tenant is taking longer to payoff the property "for you".  Let them...that's their job...don't help them.