For those investing in real estate properties, I wanted to get your opinion if it's a good idea to down 20% or to down as little as possible? What I'm finding is that downing 20% leaves me little room for money to invest in other properties but I enjoy a better interest rate and a lower monthly payment.
2006-12-17 03:18:43 · 6 answers · asked by visage1974 2 in Business & Finance ➔ Renting & Real Estate
Your rate of return on your investment is always higher with less money down. Example:
A $200,000 home that goes up in value by 6% per year.
Price $200,000 Down payment $40,000
(goes up $12,000/yr)
Return on investment (ROI) = increase / investment
12,000/40,000= 30% increase
Same scenario but $10,000 down
12,000/10,000= 120%
As long as the property generates enough cash flow to cover the mortgage and all expenses. If it does not you will have to factor in the additional annual expense into the equation.
2006-12-20 15:12:07 · answer #1 · answered by smilin1 2 · 0⤊ 0⤋
You need to analyze each transaction on its own merit. If rents are high enough to make the monthly nut on a low-down buy, that will increase your ROI substantially when you sell. Your ROI is based on your down payment and closing costs, adjusted for any positive or negative cash flow.
If you are buying as an investor, you'll probably need at least 20% down anyway and maybe even more. I built my portfolio over time by buying in as a primary residence and living in it for a while and taking care of any repairs. Then rent it out and pick up a new property as primary residence. As long as you have 6 months worth of mortgage payments in the bank on the rentals, the income and expense and mortgage payments should be a wash when getting new loan for a primary residence.
2006-12-17 06:26:57 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
Real Estate investing is a leverage game, if done properly you can't beat it. In other words you buy real estate with someone else's money and you have someone else pay for the cost of acquiring that money to purchase the real estate by selling, or leasing them the property acquired. If you can't find someone to pay for the cost of the money then you picked the wrong kind of real estate or you paid too much for the real estate.
Buena Suerte
2006-12-17 03:29:54 · answer #3 · answered by newmexicorealestateforms 6 · 0⤊ 0⤋
The less down the better. If you know how to set-up a deal and you are really an investor and not an inmesser you should do great with the less down or no money down. MIP or PMI is not that important.
2006-12-17 04:01:58 · answer #4 · answered by deletmor 1 · 0⤊ 0⤋
Real property funding is a intricate area, with plenty of cash exchanging fingers. If you would love to increase your funding portfolio, truly property is an excessively general strategy to do it. This advisor will support get your cash invested safely.
2016-09-03 16:10:14 · answer #5 · answered by Anonymous · 0⤊ 0⤋
it depends how much you have leftover, most people get killed on the PMI which can run as high as $500 extra a month or more.
2006-12-17 03:20:38 · answer #6 · answered by Anonymous · 0⤊ 0⤋