How does cash down amount factor into whether to buy or not

[Tootse]

Hi, I am wondering how the amount of down payment should be considered in deciding whether or not to purchase an investment property. For instance, is it more economically acceptable to buy a low cash flow property with zero down compared to buying the same property with money down? I think the answer is yes, but I am especially interested in the factors that make it so. Thanks!

Tootse.

 

[JoeRagona]

Tootse,

Deciding how much to invest in a deal is a large debate and can only be really answered depending on your goals...your 5 year plan and what you have as `seed capital`. When you say zero down, what does that mean exactly?

I think the more challenging part is to choose an area that has most of the fundamentals working in your favour and then weeding out the deals. If by chance you need to put an additional 5% in to make the property cash flow, that may be an option if you have chosen the right area. Your investment `seed capital` will help your expenses later on when rates may be higher than they are now.


Where are you thinking of buying and how much are you originally wanting to invest?

 

[Tootse]

QUOTE (JoeRagona @ Nov 19 2009, 07:44 PM) Tootse,

Deciding how much to invest in a deal is a large debate and can only be really answered depending on your goals...your 5 year plan and what you have as `seed capital`. When you say zero down, what does that mean exactly?

I think the more challenging part is to choose an area that has most of the fundamentals working in your favour and then weeding out the deals. If by chance you need to put an additional 5% in to make the property cash flow, that may be an option if you have chosen the right area. Your investment `seed capital` will help your expenses later on when rates may be higher than they are now.


Where are you thinking of buying and how much are you originally wanting to invest?

Thanks JoeRagona. I am looking to invest $10,000 in the Halifax area of NS.

 

[invst4profit]

Take a look at this thread on another forum to get a clearer picture on how cash down payments effect cash flow.

http://www.biggerpockets.com/forums/88/top...-is-this-a-deal-

 

[Thomas Beyer]

consider cash-flow and reserves.

often it is better to use $20,000 as follows:
$10,000 down .. rest as a reserve .. as opposed to $20,000 down no reserve !

Low cash down has a higher ROI than more cash down in a rising market .. but cash-flow is tighter !

 

[tonypeters]

Tootse, Please remember this...CA$H is KING! If you can negotiate a low cash down deal in a city or town that you are happy with the "fundamentals", you should TAKE IT!

I have and I continue to purchase houses with little or NO MONEY DOWN and I will take these types of deals ANY day of the week! Now with that said, you do need to figure out what your "back door" (EXIT) strategy is the day you go in the front door.

Hope this helps?

QUOTE (Tootse @ Nov 19 2009, 04:15 PM) Hi, I am wondering how the amount of down payment should be considered in deciding whether or not to purchase an investment property. For instance, is it more economically acceptable to buy a low cash flow property with zero down compared to buying the same property with money down? I think the answer is yes, but I am especially interested in the factors that make it so. Thanks!

Tootse.