higher down-payment equals to more cash but lower CoCROI

[Samuel Chua]

May I know why higher down-payment equals to more cash but lower CoCROI? Thanks!

[Kenneth Garrett]

@Samuel Chua

Look at it this way. I pay 100K cash for a property. My cash flow after expenses is $1000 a month. That's $12,000/ year. That's a 12% return annually. It will take 8.3 years to receive all of your money back. The other option is 20% down and a bank loan on the rest. In this scenario you put $20,000 down and say your mortgage payment is $500/month. Cash flow is now $500 instead of a $1000, but your CoC return is now 30% annually. It will take 3.3 years to get your cash out and your tenant is paying for the cash flow and your return on your money. Your CoC is infinite after 3.3 years. @Joe Villeneuve is correct.  Use as little cash as necessary.

Good Luck.