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Down Payment Options<br />
Before you decide on what down payment is best for you, first decide on<br />
the strategy of why you are investing in real estate. Buying and holding real<br />
estate is subjective to how long you want to hold the property and why. Most<br />
borrowers that I deal with are looking to buy and hold the property mainly as<br />
a retirement asset. They want the asset to generate a passive income today<br />
as well as when they retire. Even with that strategy, some people feel they<br />
need to put at least 50% down when purchasing real estate to give them<br />
greater peace of mind knowing that they only have a 50% leverage on the<br />
property. Leverage is leverage. It all depends on the payment option that you<br />
feel comfortable with, but not to get too greedy. You need to be smart with<br />
your money. You work hard for money and want to see it grow for you.<br />
I’ve been working with<br />
investors for over 17 years<br />
and<br />
have been fortunate<br />
enough to be an investor<br />
for<br />
the last 10. I personally feel<br />
that<br />
real estate investing is<br />
always the best way to go<br />
regardless of the economic<br />
environment. I enjoy having<br />
discussions with some of my<br />
very<br />
seasoned landlords that<br />
have been investing since<br />
the<br />
early 80s. To hear them talk about the difficulties of finding loans over the years<br />
and also accepting higher rates where today’s new investors would not even<br />
think about. Most of the investors that I work with have the same strategy that<br />
I do, “Buy-and-Hold.” The sweet spot for down payment is typically 20%. The<br />
main reason for 20% down is they don’t want to have private mortgage<br />
insurance and have the option to escrow their tax and insurance payments.<br />
Most proformas that you will be presented when purchasing investment<br />
property will typically have a 20% down and 80% loan to value scenario.<br />
Can you put less down 20%? Yes, we do have a 15% down payment<br />
option available, but keep in mind; it does require private mortgage insurance<br />
and your cash flow will not be as good.<br />
Here is an example of the benefits of putting a full 20% down versus 15%.<br />
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