Sacrificing interest rate for larger ROI and quicker growth
So I invest in buy and hold multi-family real estate in the Rochester NY area. My question is does it make sense to take on a higher interest rate if it allows you to negotiate to a lower down payment and less closing costs. Here's an actual property I'm looking at with rounded numbers to make it easier.
TRADITIONAL. HIGHER INTEREST
Price 50,000. Price. 50,000
25% down. 12,500. 20% down. 10,000
Closing cost. 3,000. Closing cost. 1,000
Total invest. 15,500. Total invest. 11,000
Income (3 units) 1,800. Income (3 units) 1,800
Payments for. Payments for
30 yr at 5% : 109 a month. 30 yr at 12%: 124
Other expenses: 891. Other expenses: 891
Total expenses: 1,000. Total expenses: 1,015
ROI after a year: 62%. ROI after a year: 86%
Bank makes: 4,875 after. Bank makes 5,800 over
Life of loan. Life of loan.
To me it seems like if I can use the interest rate to get to a lower down payment/ closing cost I can substantially increase my return on investment, shorten the time needed to save for a property, and even make the bank more money at the same time.
What are your thoughts? Am I missing something?