Courtesy of Steve Lewis
- Steve Lewis prefers to finance investment properties with a 15-year mortgage.
- The part-time real estate investor, who scaled up to three condos, is focused on building equity.
- With a 15-year mortgage, you sacrifice cash flow for building equity quicker.
Steve Lewis has experience with both 15- and 30-year mortgages — and if he buys more investment properties in the future, he says he’d pick the shorter-term loan every time.
The very first property he bought — a condo in New Jersey — was his primary residence for 14 years.
“The first property was already under a 30-year, so I just left it,” Lewis, who works in cybersecurity full-time, told Business Insider. In 2014, he purchased and moved into a single-family home. Rather than sell the condo, he turned it into a rental.
For his next two investment-specific properties, “I went to the 15-year,” he said. “It was a really good decision at that time and what I recommend to anyone that’s going to venture out into this kind of investment.”
He prefers the shorter-term loan for a few reasons, the main one being that it allows you to build equity much quicker.
After owning a property for just five years, “a third of the property is paid off already by your tenants,” said Lewis, who sold his three condos in 2024 and plans to use the cash to invest in commercial real estate. BI verified the three sales by reviewing his settlement statements.
Whereas, with a 30-year mortgage, “you’re paying mostly interest for your first seven years.”
The trade-off is cash flow, he pointed out, but that’s never been his primary focus: “It’s always a debate between cash flow or equity building. If you take a 30-year, your payment will be lower, so you’ll have more cash flow. If you do a 15-year mortgage, your payment will be higher, but your equity will build much quicker.”
He’d rather sacrifice some cash flow to get a bigger payday at the closing table.
“If you’re really, really nervous about cash flow, do your 30-year,” he said. “But I recommend doing a 15-year and 20% down.”
Even with a higher monthly payment, Lewis said he was able to profit between $100 and $150 a month on both of his 15-year-mortgage condos.
He thinks that going with a shorter loan forced him to make a better decision when selecting his investment property. After all, when calculating cash flow (income minus expenses), it’s harder to make the numbers work when you have a bigger mortgage payment.
If you go the 15-year route, Lewis noted that it’s extra important to have a substantial emergency fund. If you have to take care of a major repair, for example, your cash flow may not cover the expense.
He recommends first-time investors save 12 months’ worth of property expenses: “Let’s say your mortgage payment is $1,000. Put $12,000 in the bank.”