What’s up y’all - Curious what you guys think regarding financing investment properties
Is it better to put down a larger down payment (30-35%) on an investment property vs the minimum (~20%)? If so, why?
Specifically, I’m looking at investing in a quadraplex in the Austin, Texas market and weighing out the best way to finance this deal.
@Damian Chavero It will completely depend on your goals. Do you want cash flow? In Austin, you'll need to look at larger down payments to achieve a cash flow positive level. I would also check with your lender to verify what the minimum amount you could put down. For most conforming investment loans, you will need at least 25% to get the optimum interest rate.
@Damian Chavero the name of the game is to put as little as possible in all circumstances. The returns on the property will always be the same (nominator) but the amount invested into the property will fluctuate (denominator). ROI= return/investment. Lower investment on same return is always a higher ROI.
DSCR lending allows for 20% down with rates in the 4's on a 30 year so you can maximize your cash flow as opposed to conventional. Higher ltv, similar rate significantly less hassle. Closing costs are more with DSCR, but many are opting for ease of use.
Money is still very cheap so I would recommend putting the minimal down. You can find something that will pay better than 4% on the money you keep. Also, it will depend on where you buy in the Austin area, but there are some 4 plexes you could still break even cash flow with the minimum down. You will at least have no problem covering the note.