Pay for full property or only down payment when wanting multiple?

6 Replies

So my name is Jared (I'm 25) and I've been wanting to invest in real estate and I feel like the area I want to invest in is perfect for making money for my needs. I lived in the town that I want to invest in and I really know the market and where to buy. The town is a college town and they always need rentals. The Nice thing is that this is not a party school and people go to school to go to school which is nice when wanting to invest in rentals.  These are my questions....... I can pick up a pretty much turn key house for about 50-60k. Maybe needing paint and simple stuff like that. I personally have 13,000 saved for me to start this and I have a family investor that would be willing to almost get me the rest. These houses rent for right around 700-800. Would it be smarter to Pay say 45k and finance the rest and only have super low payments and use the equity into another house? or put a lot less down? This is basically what I'm trying to figure out in order to start this process. I'd like to get 4 rentals in one year once I start and to a lender after the first, would having almost the whole thing paid off and show it bringing me a positive of like 500-600 a month or saving some of the money two have a 2nd down payment. 

Option 1

House Price 50,000

Down payment 40,000

Payment 100ish

Property income 750

(in the positive 650)

Option 2

House price 50,000

Down payment 10,000

payment 400ish

Property income 750

(In the positive 350) 

Which one would a lender like to see in order to get a 2nd home, then 3rd so on and so on. 

Thanks, Jared 

I would do a full analysis on a few properties and look at your cash on cash return. There are a few more expenses than just the mortgage payment.

The calculators on BP are great.

Expenses will consume 50% of your rental income before debt repayment.

With rent at $750 - expenses - debt repayment = ? cash flow.

Your problem will be getting financing, hard to get on low value properties. If you have a friend willing to loan on a 60K property if you have 13K they will need to add 47K plus all closing costs. Likely over 50K in total from a friend. I would suggest you borrow it at a basic interest plus principal if you can with a balloon payment in X years. 

You will also need reserve funds (several thousand) to do reno work and cover repairs initially. 

Hey @Jared Van Horn I would second @Jordan Moorhead post. Use the BP calculator to find what your cash flow would after property taxes, vacancy %, insurance etc....  figure out how to put the least amount of money in so you can use the rest on other properties. 

I guess my big question is it smarter to put more down like 70% or just do the minimum to get qualified if a second property is what my goal is or to put a lower amount down if my tenants are paying my mortgage. Just wondering if putting so much money into one is smart to show more positive equity or spreading that wealth and trying to get multiple with less in the first house. Hope that makes sense like it does in my head haha.


You have to be credit worthy in the eyes of a lender with most strategies. You could buy for cash if you find a killer deal, rehab it, then refinance and pull your cash out.

Or you could use an FHA or other low down payment loan and put between 3.5-5% down and save your money for the next place. You'll have to live in it for 6 months to a year with this strategy but that's not a big deal.

For maximum ROI and cash flow you leverage to the maximum.

For risk intolerant investors content with low ROI you pay down the mortgage. You buy your cash flow.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here