How much should you have to put down for a property to cash flow?

4 Replies

Looking at purchasing a property-  If I put at least 30% down it will cash flow, however, is that too much?  Should you have to invest that much to generate cash flow?

@Hen Ley ideally, nothing. In a perfect world, the property should cashflow if 100% financed. Otherwise, the first number of years of cashflow are simply paying your downpayment back to you, and not really cashflow at all.

That being said, that's not possible in some areas, so it comes down to your comfort level and the return you're looking for. There's no right answer....

@Hen Ley putting more money down just to get cash flow is not a productive use of money. All you are getting as a return is whatever the lender would charge in interest minus what you could write off as a tax expense; so maybe 3-4%. Instead use that cash to buy another property-unless that over leverages you. 

That cash can also be used to improve rental units to get more rent. That is my favorite; often you can spruce up an apartment at turnover time for only a few thousand and get way more rent than you would otherwise get. Do your homework, what is the market rent and can I get market or more by investing in the property; just be cautious about overimproving. All the best!

Completely agree. Most of the time you need to put $$ down to qualify for the loan but if it's a good deal you shouldn't need to doctor the numbers to MAKE the property cash flow. If you have to try to make the numbers on a deal work it's probably something you shouldn't be doing, that's how you get into trouble quickly.  

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