Large down payment?

Question

Does it make sense to put down 50-60% of purchase price to guarantee positive cash flow? Any advice would be helpful

Jen Tra · Answer

I've been investing in RE for 10 years, mostly rentals with as little money down as possible.

The idea behind it is if you can leverage as much as you can and risk very little of your own money that is where you want to be.

The best cast is you will cash flow a little and slowly pay off your property on a 30 yr mtg or15 yr mtg.

The worst cast and the rental market/ RE market tanks on you, all you have to lost is a little money and your credit for a couple of years. This is happening a lot right now.

Also watch out for unexpected expenses, bad tenants, property repairs, inspection fees.

In summary, I would advise strongly against putting a lot of money down.

Jeff Corpuz · Answer

All you need to do is locate properties that are priced under 65% of value if not more. You'll be able to make a positive cashflow if you buy right.

Putting in that much cash may or may not be a good thing, depending on your current financial situation.

Dave Versch · Answer

Not at all.  You're incurring an opportunity cost that way as well.  In other words, what you're gaining in cash flow, you're losing by not investing the 50-60% somewhere else.  If it won't cash flow positive at 100% financing, it's not really cash flowing.
That's not to say that you should never put that much down on a property.  If the property would cash flow with 100% financing, but you choose to put down a chunk of cash anyway, that's a different story.