CoCROI 10% or 20% Down
I have an option of putting 10% down, in stead of 20%, on a 120k home.
With 20% I have more equity but with 10% I have a greater cash on Cash Return.
Which is a better move?
What would be better, buying two of these properties at 10% down or one at 20%?
Tell us what your cash flow projections would be.
@Steven Orgo, in addition to what @Greg Scott said, are you looking to get one house and call it quits or looking to grow your portfolio? If the latter, which option gets you to save x, in order to buy that next property?
I think you get the point that Chris and I are trying to make. We would put 10% and buy 2 instead of 1. Why? Because we would be interested in cash flow(more money to you) rather than equity.
I hope this helps.
Thank you for the expedient responses!!!
Ill answer the best I can. I'm new to this and have been inspire by the Bigger Pockets YouTube feeds. So I bought the book and I'm taking a risk. "getting off the couch"!
The rent is approx. 1100 pm. So 1100/12k =.91 or 9.1% CoCROI and the 24k would be 4.5%.
The mortgage broker told me I can get into the home as a "2nd home" (for a lower rate) as long as I have 1 in each town. As I understand it 1 house in town A, could be a 2nd home. Another in town B, would be a second home etc.
To answer your question: I would like to grow my portfolio. Though the houses are 120k or less - Should I be concern about about my Debt to Income ratio preventing me from doing that. Especially if I dont have a lot of equity or a rental income record. What do I do about that? Is that even a problem financing 2 of those type of properties at 10%?