Rental property, does higher down payment make sense
Looking to purchase a rental property for $330k, leases are already in place for the following year and rent roll is $3200 per month. At 25% down I’m looking at roughly $2300 for principal, insurance, and taxes per month on a 30 year loan at 7.6%. What are some thoughts on putting say 30% down to increase cash flow a little bit and pay less interest over the life of the loan ? This will be the 3rd rental property in my portfolio.
with the interest rates being so high I feel Iike a higher down payment could be a good idea over the long run, but I’d like to hear some ides on this, thanks in advance !
Most Popular Reply
@John Peppard, I would not do that UNLESS perhaps the deal did not cash-flow without doing that. I would like each property to stand on its own. I don't want to carry any dogs in my portfolio.
Money is made on the spread. The spread is the difference between what money costs you (interest) and what you can earn by putting it to use. As an investor you should be able to put that money to better use than the savings of some interest.
If you have no immediate use for it, park it in a CD or something like that at 5% until you are ready to do something like buy another property. That will largely offset what you would have saved in interest until you are ready to do bigger things with it and get a larger return.