When you finance a property how much do you have to put down?

Question

I am new and looking to buy my first long term rental, something small looking 2 - 4 fam.  Question is generally how much money do you have to put down? Or would you recommend to put down?

Joe H Watson · Answer

Hi Isaac, I understand why you are concerned with the down payment amount. I am wondering, have you found any properties in your area or somewhere you are interested in? If you have found a property and you know the price that is great, if you go a couple of steps deeper you will be able to make a better assessment of an appropriate down payment. If the property is up to bank financing standards I would try to purchase it with a low 3.5% fha loan (my opinion best for cash flow and infinite return strategy is a property that is up to standard of the lender but not newly renovated). I am a leverage investor because I am young and do not plan to rely on my properties cash flow for my life style. Rather i will use my properties cash flow for reinvestment into other properties. When you find out more information about a specific property you may be able to negotiate seller financing with a down payment and terms. Remember that investing is not about loving the property or the price or the amount of the down payment. Investing is about finding an asset within your budget that gives you a return you deem as decent.

Wishing you the best in all your future investing, Joe

Isaac El · Answer

@Jerry Padilla  thank you Jerry

Josh Oaten · Answer

@Isaac El

From what I see it is between 20-35% for commercial assets depending on the property.

Isaac El · Answer

ok update, I used the bigger pockets mortgage calculator (I didn't even know there was a mortgage calculator here! still becoming familiar with the site)

I used the following numbers:

$575,000 loan

Taxes $5,200

Insurance $2,400

Interest Rate 5%

Loan Term 30 Years

Monthly mortgage payment comes  to $3,720.05

So this deal isnt really worth it as a BRRRR - will keep it fix and flip, but now that I learned numbers and with all your help, for my next one I will be looking at a 3 or 4 fam.  Cost per door comes out less, and looks like BRRRR will work out better.

Isaac El · Answer

@Jerry Padilla  Hi Jerry, no I will not be living there, only an investment property.

Jerry Padilla · Answer

@Isaac El

With FHA you are required to live in the property? Is this your intention? Do you already own a primary residence? Going from a SFR primary to a MFR primary with FHA will be questioned by an underwriter, and can be difficult to prove that you are not just doing it as a low down payment way of gaining investment properties. If you don’t own a primary yet, it shouldn’t be a problem.

Isaac El · Answer

@Connie Chan thank you so much typically how much do you need to put down for example property I’m looking at goes for 750k and needs another 125 in work

Lorraine Patterson · Answer

@Joe H Watson question aren't FHA loans approved only if you are planning to move into one of the units in your property for at least a year?

Jerry Padilla · Answer

@Isaac El

With conventional financing an investment property SFR is a minimum of 15% down and a 2 - 4 unit MFR is 25% down.

When you finance a property how much do you have to put down?

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