Put 20% or 25% down on multiple 4 plex's or larger % on 1?

Question

Myself and a couple family members are looking to get into multi family rentals. We have experience with single family homes. We are leaning toward 4 plex's. I would rather put 20-25% down on a couple but other family members are thinking about just putting 60-80% down on one. What are some other thoughts and arguments to sway toward more leverage?

Curtis Rouse Jr · Answer

@Robert Falco Great question and this honestly comes down to your personal goals and in this case your family as well. Honestly, you want to be "safely" leveraged as possible without having to much of your own money in the deal. You want to use the banks money and use that other 30% - 40% on another deal that should increase your ROI depending on how good of deal you invest in. You look at some of the biggest companies like Apple for instance and they borrow as much money as possible even though they have billions in the bank. Why? Because leverage uses OPM and allows you to expand more rapidly while still have your cash reserves if necessary. Also, if you have family members involved, I would start looking at the larger apartment complexes where everyone would get more bang for their buck. This is personally what I invest in and plan on bringing in more investors for larger apartment deals. It's harder to do this on the smaller MFR end unless you have market appreciate, which in my opinion is speculation and more riskier. Again, this comes down to everyone's goals and aspirations. I hope this helps and let me know if I can be of any additional assistance. Best of luck!

Max T. · Answer

25% down is the minimum on non owner occupied multi unit properties with conventional loans.

Brent Coombs · Answer

@Robert Falco, I (and many here on BP) agree with you: buy as many properties as you can qualify for, with as little deposit as allowed, while still aiming for some positive cash flow.

ie. Ongoing cash flow need not be your primary focus for the dollars you've already saved. Rather, your wealth accumulation can come about by buying under market to begin with, in areas that should keep improving in value, and which are then 100% paid off by your tenants!

Mind you, if you want to consider that buying just one property could be the way to go, then the same criteria can still be applied: minimum deposit; maximum bargain! (ie. Still no emphasis on the amount of ongoing cash flow!) ie. Real Estate is a very effective get-rich-slow scheme!...