Newbie Question

General Real Estate Investing
1

Firstly, what a great forum. I’ve spent the past two hours devouring all of the great information on here. I do have a question, though.

I am getting ready for my first deal. It is an $85k 1br, and I plan on making an offer of $70.

But my real issue is about how much to put down. If I put down 20%, I can avoid having to pay PMI. However, in my reading tonight, I’ve read that you should put down the minimum so as to keep cash available for other deals.

Can someone explain which is correct? Thanks.

2

Both are correct. If its a rural property you may be able to get a USDA RD loan, these have no PMI. I don’t know what you’re gonig to do with property, but if multiple properties is what you want look for seller financed homes. Herbster

3

It would depend on what you plan on doing with the property. Are you going to wholesale it? keep it as a rental? or rehab it and resell it? Answering that might help giving you a better answer.

Thanks

4

Thanks for the responses.

In the current market, my goal with this property would be cashflow. My thinking was as follows…

$80k Sale Price

Put down $16 (20% to avoid PMI)

The loan would be $54,000. with PITI and monthly maintenance fee, my nut would be about $575.

The minimum rent in that area is $950. per month.

Thus the debate about 10% down vs. 20% to avoid PMI.

5

For conventional financing on a non-owner occupied property you may be hard pressed to find a loan for 90% so that may make the decision for you.

That said if the cash flow covers the pmi then I’d go with 10% down. Keep the 8k for the next deal.

6

I agree with Mike. Use other people’s money to make you money. Don’t use your own (or much of it). By putting 10% down you may be paying $50 in PMI but you will have $8k to put as 10% down on your next property which will net you way more than the $100 ($50 on two properties). OR you can put that $8k into renovations that will create more than that in equity and possibly increase your rental income. Whatever you can do to reduce your total upfront costs will increase your Return on Investment and that is ALWAYS good.