Discussion: buying investment property cash down or 50% down

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Discussion: buying investment property cash down or 50% down

Rhona Didi
Bedminster, NJ · Member since 2020 · 13 posts · 1 vote

Hi

Just opening a discussion topic for pros and cons of buying investment property fully cash down or 50% down?

What are the benefits of either? I don’t have much experience in investing in properties. I was only a landlord for two years from 2011 to 2013. This was from necessity not choice. We had to move to a better school district so I had to rent out my paid off town house for couple of years.

Overall experience was good.

Today I’m thinking it would’ve been nice if I had bought a second property in a good school district and put on rent.

Thanks.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Put more down and it's a safer investment but with a lower rate of return.

    Put less down and it's a riskier investment with a higher rate of return.

    Use a calculator and experiment with 20% down, 50% down, and 100% down. You'll see a major difference in the return.

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y

    I'd rather do all cash than 50% leverage. Going through the pain and costs of a mortgage is just too great.  

    They are not apples to apples.  Cash buys are accepted more often and offer many chances for discounts, especially on odd,r fixer upper or need fast sale properties.  

    if buying a vanilla rental on-market, I'll get an 80% loan and save the cash for a real opportunity. A 50% loan doesn't close faster or cost any less. 

    My portfolio is more paid off than not.  I either have a lot of quality leverage on an asset or none.  50% (or 60 or 30) is not very useful and limits your options.

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  • Rhona Didi
    OP
    Bedminster, NJ · Member since 2020 · 13 posts · 1 vote
    5y

    @Steve Vaughan

    Ok. What ever the loan amount is, it would cost $$$ to initiate. So if a loan is taken it makes sense to just take as much as you can. On an investment property the entire mortgage amount (principle and interest) can be itemize deducted from taxes.

    In what cases do all cash offers work? How would I approach the seller side to do an all cash offer and get a discount?

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @Rhona Didi:

    @Steve Vaughan
    In what cases do all cash offers work? How would I approach the seller side to do an all cash offer and get a discount?

    It's situation-specific.  I use cash to buy what can't be reasonably financed.  My last one was a single-family 3/4 through reno.  I had to trim it out, install water heater straps and minor things.  Now its bankable and worth over $80k more just because a buyer can now get a loan on it. 

    Another one was a mobile on land, 2 houses on one lot, commercial, mixed-use, non-performing, etc.  No or very little competition once easy loan buyers are removed.

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