20% down payment vs 5% down payment & property value appreciation

[Dennis Kim]

Hello everyone so I have this dilemma that I keep going back and forth in my mind about

I'm currently saving up for a down payment for my first property here in Southern California where the houses aren't cheap compared to other states.

If i were to try to save up for a 20% down payment for a $700,000 property with how much im currently saving per month today. it would take me approx. 2 years from today.

where as if I were to save up for a 5% down payment I can be financially ready by January of 2026.

But when I weight out the pros and cons I would have to pay PMI and have a overall higher monthly mortgage if I were to do a 5% compared to 20% down payment. So it'll be easier for my mortgage to eventually break even and cash flow faster than the 5% down payment option.

But If i were to wait on average 2 more years the property value appreciation alone might already go much higher than the initial $700,000 property I was looking at.

I'm so excited for this opportunity that im getting anxious and frustrated that I can't save faster, im already 38 so I feel like im getting into this pretty late compared to others. and i would be wasting time not being able to learn all the little things of having my first property.

what is your guys thoughts on this? and which option would you do if you were in my shoes?  Especially with the wisdom you guys have and probably are seeing things that i don't even know to look out for. Thank you!

[Allan C.]

search the forum for condo stories and you'll see lots of insurance, special assessment and other hassle factors that add cost burden of condos. Appreciation is also lower for condos cuz that's a less desirable asset class. Yes the barrier to entry to buy a condo is lower, but that's also why it has lower yields. 

I get that you're interested in getting into the game, but don't let your anxiety lead you to a less optimal decision. Condos give you more size for the buck, but that's comes with trade-offs. I'd rather buy a smaller duplex than a larger condo. You also have limited control over the competency of HOA members, and generally speaking most people are not highly incompetent, or they are easily swayed into abuse of power.

Buy in a good location, make sure you understand state rental laws, and pay attention to specific city tenant laws (ie. incorporated vs unincorporated LA). Also look into other city specific building standards (ie. LA soft story retrofit requirements).