Down payment of $230K not a wise investment?

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Down payment of $230K not a wise investment?

Lara N.
HI · Member since 2011 · 20 posts · 2 votes

I'm debating between two investment scenarios & would appreciate your input!

I'm considering buying an updated older 2/1 house in a hot neighborhood with a permitted 1/1 basement apartment with it's own full kitchen, exterior entrance & washer/dryer. The house is lovely & unique, plus it's taken care of.

I would need to put down $230,000 cash for the down payment due to the mortgage/terms & my portion of the rent (minus roommate payments) would be $700-800 month plus utilities. If I rented out the whole house plus the basement apartment I would net about $300-$400 monthly.

**My 2nd option is to buy a cheaper house which would allow me to keep more of my cash but I would pay a higher monthly mortgage payment.

I'm only working part time now & will be starting a new business soon so I'm leaning more towards having more cash in the bank.

Thoughts on the best investment strategy?

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Matt Maurice
Property Manager · Milwaukee, WI · Member since 2014 · 113 posts · 144 votes
6y

Long term real estate wealth building is great, and ONE of the best ways to achieve early financial freedom.  Another great option?  Starting a business.

Having a strong liquid position when starting a business can be extremely important, not just to your bottom line but to your stress levels.  Building a business can be stressful enough, don't make it worse by stretching it thin.  Be disciplined to put aside the reserve cash and NOT spend it in the business as well!  Damon John (FUBU guy and Shark Tank investor) has some great content on how money can kill a startup.  There is a lot to be said for an entrepreneur that has to hustle to pay the bills, you want to create that level of scarcity without actually being broke.  Almost every business doesn't need a big marketing budget when starting out (or any, really).  Usually they need an innovative founder with some sales skillz and hustle.

So pick the option that will provide you the most security, lower cost living and more cash in your pocket.

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  • Matt Maurice
    Property Manager · Milwaukee, WI · Member since 2014 · 113 posts · 144 votes
    6y

    Long term real estate wealth building is great, and ONE of the best ways to achieve early financial freedom.  Another great option?  Starting a business.

    Having a strong liquid position when starting a business can be extremely important, not just to your bottom line but to your stress levels.  Building a business can be stressful enough, don't make it worse by stretching it thin.  Be disciplined to put aside the reserve cash and NOT spend it in the business as well!  Damon John (FUBU guy and Shark Tank investor) has some great content on how money can kill a startup.  There is a lot to be said for an entrepreneur that has to hustle to pay the bills, you want to create that level of scarcity without actually being broke.  Almost every business doesn't need a big marketing budget when starting out (or any, really).  Usually they need an innovative founder with some sales skillz and hustle.

    So pick the option that will provide you the most security, lower cost living and more cash in your pocket.

    1Reply
  • Gabriel Adams
    Member since 2019 · 1 post · 0 votes
    6y
    You should definitely spread out your wealth because, in that way you can diversify your portfolio. This can create exponential growth in you investments.
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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    6y
    Originally posted by @Lara N.:

    I'm debating between two investment scenarios & would appreciate your input!

    I'm considering buying an updated older 2/1 house in a hot neighborhood with a permitted 1/1 basement apartment with it's own full kitchen, exterior entrance & washer/dryer. The house is lovely & unique, plus it's taken care of.

    I would need to put down $230,000 cash for the down payment due to the mortgage/terms & my portion of the rent (minus roommate payments) would be $700-800 month plus utilities. If I rented out the whole house plus the basement apartment I would net about $300-$400 monthly.

    **My 2nd option is to buy a cheaper house which would allow me to keep more of my cash but I would pay a higher monthly mortgage payment.

    I'm only working part time now & will be starting a new business soon so I'm leaning more towards having more cash in the bank.

    Thoughts on the best investment strategy?

    Please check your math. This sounds like an owner-occupied home so you should be able to put down 5% or less. Based on a down-payment of $230,000 you are purchasing a home valued at $4.6 million. Do you mean a down-payment of $23,000 and a purchase price of $460,000?

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