How much money do I need for a $300,000 rental?

Question

Hello everyone. I’m trying to put together a budget to figure out how much money I need for a $300k investment property. The goal is appreciation and equity growth rather than high cash flow.

I get I’ll need $60,000 for the down payment. But what can I expect in closing costs (no points) and reserves to cover the period before its leased up?

I’ve got a rough idea, but I bet there are a lot of little unexpected costs I am not anticipating.

Thanks for your help.

Basit Siddiqi · Answer

Banks will require that you have 1) 20% down payment(less if it is owner occupied)2) Closing Costs3) Several months of reserves

Stephanie P. · Answer

@Chris C.

If you're not paying any points, I'm assuming you're going conventional. Before anyone can venture a guess, they need to know where the property is; transfer taxes, recordation tax and doc stamps can vary wildly across the country.

Torrell Palmason · Answer

To start you off on a $300k the Down payment for a conventional loan on a 1-unit is 15% or$45k and on a 2-4 unit it's 25% or $75k.

After that the closing costs will include origination charge, taxes, Appraisal, Credit Check, Flood cert, Insurance, Mortgage insurance if your LTV is higher than 80%, Title charges. With these charges you can see how it will vary on each one but middle of the road should cost you roughly 6k-7k. Reserves will be determined by the Automated underwriting which will look at the overall strength of the Credit package.

Timothy Hero · Answer

Closing costs can range depending on conventional vs private/commercial, plus each bank can have a different list of fees.

For conventional, it seems closing costs average 3-4% of the loan amount and 3-5% for commercial.

Greg Scott · Answer

If you are just making a standard purchase, you'll need about $5,000 for closing costs, plus insurance, plus any reserves required by your financing (varies), plus any deposit required by your property manager, plus a rainy day fund in case something unexpected goes wrong.

On the other hand, if you can buy it using hard money and have found a distressed property at a great deal, you might be able to get as low as zero out of pocket. If you buy it right, you are also capturing equity when you buy it and not just hoping the market goes up.

Remember, some times the market goes down. It is always better to ensure you have equity gain, rather than just getting lucky that the market went up.

How much money do I need for a $300,000 rental?

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