How Much SHOULD You Put Down on an Investment Property? (Rookie Reply)

Real Estate Rookie

BiggerPockets

How To, Education, Business, Investing, Entrepreneurship

4.8 • 1.7K Ratings

🗓️ 15 November 2024

⏱️ 35 minutes

🔗️ Recording | iTunes | RSS

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Summary

How much should your down payment for investment property be? Should you increase your down payment to maximize cash flow, or does putting all your financial eggs in one basket limit your ability to build and scale your real estate portfolio? Or should you instead pay off that high-interest-rate mortgage early to keep all the cash flow at the end of the month? We’re answering these questions in today’s Rookie Reply! With high mortgage rates, one rookie asks whether it’s better to pay off their home with a seven percent rate INSTEAD of investing in more rentals. Paying off that loan gets you an automatic return, but there’s a strong argument as to why it isn’t the best move. Are you doing your first house flip? Another rookie wonders whether they can negotiate when taking on a hard money loan and if the juice is worth the squeeze for a $50,000 profit on their first flip. Looking to invest? Need answers? Ask your question on the BiggerPockets Forums! In This Episode We Cover Investment property down payments and how much you should put down to prioritize cash flow Whether to keep investing or start paying off your high-interest-rate mortgages Why you can’t just look at the cash flow when analyzing a potential investment Financing a house flip and negotiating with a hard money lender (should you negotiate?) What you should ALWAYS do before you take on a house flip to ensure your numbers are right And So Much More! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/rookie-484 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Let's get your questions answered. I'm Ashley Care and I'm here with Tony J. Robinson.
0:06.7	And this is the podcast to help you kickstart your real estate investing journey. And today,
0:11.4	we're diving back into the Bigger Pockets forums to get your questions answered. And for all of
0:16.1	your Rookies that are listening, the Bigger Pockets forums are the absolute best place to get
0:20.5	your real estate investing
0:21.6	questions answered quickly by experts like me, Ashley, and so many others. So here's what we're
0:26.8	going to cover today. First, we're going to talk about how to determine how much you should put
0:31.0	down on your first rental property. We'll talk about whether or not it's a smart move to pay
0:35.6	off a mortgage on your primary residence and the things
0:38.7	to keep in mind when you're analyzing your first flip. Now, before we jump in, we want to thank
0:43.4	Corporate Direct. This episode is sponsored by Corporate Direct where you can protect your
0:47.3	properties with an LLC and let Corporate Direct take care of the paperwork. Head over to
0:52.0	BiggerPockets.com slash direct for a free 15-minute
0:55.6	consultation and $100 off if you mentioned the podcast. Now, let's get into the show.
1:00.7	So the first question we pulled today is, am I putting too much down on a new rental property?
1:08.9	This is a single family home. This is my first investment in real estate,
1:13.4	apart from my own. I'm investing in a rental property in Airbnb in California. The sale value is
1:19.7	$515,000. I'll be putting down around $300,000 and finance the rest. I expect to make $2,500 per month on average through the year as an
1:31.3	Airbnb rental. This is based on actuals from the prior owner. They gave us an Airbnb statement
1:37.8	that we could verify for the last couple of years. The current mental map is to look at what my
1:44.0	total annual costs are, my mortgage plus property
1:47.9	taxes, plus insurance, plus property management, plus approximate maintenance and utilities, etc.
	...

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