What mortgage term should I get?

[Adam Garcia]

I have a deal under contract and wanted to get other investors thoughts on the term of the mortgage I should get. The purchase price of the property is 200k and it is ready to be rented so no money will have to be spent in repairs as of right now. With a 30 year mortgage my payments are around $800/month and with a 20 year the payments would be $983. The property is a duplex and net rent per month is at $1800 so either term would be cash flow positive. 

Is it better to take the extra couple hundred bucks a month in cash flow with a 30 year loan or take a smaller cash flow with a 20 year mortgage but pay much less in interest. Thanks.  

[Jim Freeman]

I'd take the lower payment/longer term loan as long as there is an option to make extra principal payments without a penalty.  Having the option to make a lower payment when anything unexpected happens is a great cash flow cushion.  If everything goes according to plan you'll get to decide each month, before making the mortgage payment, how much (if any) extra principal you want to include. You never know when a water heater, HVAC system, etc. are going to take a bite out of your checkbook.