15 vs 30 year refinance in Temp, AZ. Or Cash-flow vs Pay-down...

[Nehemias Ponce]

Hi everyone! We're about to refinance our rental property and I am looking for some advice. Here is some background information first. The property is located in Tempe, AZ and is currently valued at approximately $200,000. The principal balance on the note is $121,500 at 5.25%. Our payments are $950 and we collect $1,100 a month in rent on it. We are definitely going to refinance, however I am not sure what length of a note we should get. Below are two possible scenarios:

1. 15 year note: Conventional wisdom says that paying down the note sooner would save interest and of course lead to a more full cash-flow from the property sooner. 

2. 30 year note: However, currently the property sustains itself in that we do not pay any interest on it at all (out of pocket), the tenant does. So then, a 30 year note would allow us to cash-flow even more than we do now. 

I do not have any numbers as of yet to give a more precise calculation. This is just a general query regarding the benefits of maximizing cash-flow vs faster pay-down in the current and near-future markets. We will also be holding this property. We have no plans to sell. Our future plans do include purchasing another investment property. I'm studying about it right now and hope to begin analyzing properties soon. 

I'm especially interested in hearing from people @Hannah Hammond familiar with the Phoenix market in particular who might weigh in on one note versus the other. However, all help @Mindy Jensen is so very much appreciated. Thank you for any knowledge and guidance you can provide!

-Nehemias