Drawbacks of making a large down payment?

27 Replies

Originally posted by @Anja Wehrmann :

Have you thought about note investing? 

I don't know what note investing is so I'll have to do some research to see if/how it will fit with our investment plans.  Thank you for suggesting this to me.

What kind of returns are you seeing?

@Liz Brumer

I appreciate the response.  After some more thinking, we've decided that we are willing to make a larger down payment in order to cash flow (minimally) in an area we feel will appreciate over the long term.  It's a risk, but one that we are willing to take.

The one goal we have made is to have our passive income exceed our expenses.  We are a ways off from that, still!  But since we are young, we think that we can weather a "calculated risk gone wrong" and still come out OK in the end, especially since real estate is not the only investment vehicle we will have.

@Samir S. glad you were able to find the best solution for you! That's what it all comes down to after all, what helps meet your goals. 

Note Investing is a specific area of investing in which you buy, sell, and/or create mortgage notes. This can be bank created or owner financed (meaning the owner of the property creates(ed) the note). From an investment standpoint you can buy notes that are paying on time and always have been (performing), notes that aren't paying (non-performing), or notes that the borrower defaulted but has since started repaying again (re-performing). They all come at a different discount, but typically you can see yields from the 12% - 22% range, sometimes higher if it's a non-performing note (but those are a lot more work). The best part is that you never physically own the home, just the promise of repayment of debt from the borrower. So if they need a new roof, or taxes, or anything else with property maintenance you're not responsible! It's a really cool way to gain passive income over time.  I suggest reading about it more. 

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