How much cash should I use for a down payment & holding costs

4 Replies

I cannot decide what percent of my cash to use as a downpayment, and how much to set aside for holding costs. 

I will be doing flips and have my credit line approved. I was thinking of using half of my cash as a downpayment, and the other half as a surplus to pay the holding costs. I'm sure I can go 70% downpayment and 30% surplus, but I want to play it safe. 

@Patrick Martone I feel that this will be complete personal preference but if you are intending to do flips, would you consider doing more than one rehab project at a time?  Also, how much if your line of credit for and what price point of properties are you examining?  The answers here might helps us make recommendations better.  Thanks!

Originally posted by @Andrew Postell :

@Patrick Martone I feel that this will be complete personal preference but if you are intending to do flips, would you consider doing more than one rehab project at a time?  Also, how much if your line of credit for and what price point of properties are you examining?  The answers here might helps us make recommendations better.  Thanks!

I will be doing one at a time, doing mainly cosmetic work myself. My HELOC is 312,000, I have 60,000 in Cash. The pricepoints of my homes vary form 150,000-280,000.

@Patrick Martone good information. I would strongly recommend to just use the LOC to do the entire project. That way you have $0 holding costs and it's more profits to you.

Originally posted by @Andrew Postell :

@Patrick Martone good information. I would strongly recommend to just use the LOC to do the entire project. That way you have $0 holding costs and it's more profits to you.

Well the issue is i need my cash to pay off the interest from the LOC monthly.

The more cash i put down, the less interest I pay monthly on the loc. If i put all my cash down, then i have no surplus to pay the loc. 

I have considered setting cash aside for 4 months of interest payments, but you never know what can happen with flips. Worst case I go back to fulltime work, but that is a last resort.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.