Do I need 20% down payment on an investment property?

Question

Hi, I am very new to the space of real estate and am currently reading “How To Invest In Real Estate” by the bigger pockets publishing team. I don’t have a ton of capital and was wondering if 20% down was mandatory for a property when wanting to invest. If anyone has any advice it would be greatly appreciated. Would love some discussion as I am a newbie :)

Michael Dumler · Answer

@Lj Talley, the advice that I've been preaching for years to newer investors is exactly what Randall noted above. As a first-time investor with limited capital, ideally, your first acquisition should be a house hack deal. Read "The House Hacking Strategy" by Craig Curelop to receive a better insight into this strategy. As mentioned above, the lowest downpayment required for an owner-occupied single-family home is 3% via conventional financing. On a $400k valued home, this would only require a $12k downpayment (not including other points and closing costs). Hope this helps!

Randall Alan · Answer

@Lj Talley

If your investment property will be owner occupied, you usually only have to put about 3% down. This is the “house-hacking” approach where you could buy a duplex and live in one side and rent out the other.

Otherwise, for non-owner occupied properties you usually need at least 15% down to buy the property.

here are a few guides that might help you as you get started:

https://www.biggerpockets.com/...

All the best

Randy

Dan Guenther · Answer

Hey @Lj Talley welcome to the community!

Everyone else has nailed it on the house hacking side. If you can owner-occupy this will be the lowest barrier of entry for your first deal.

If owner-occupied doesn't work out with your current life situation there are a handful of investment loan products out there and every lender will have different requirements to meet. While 20% down is typically the standard, I have done deals with as little as 10% down.

Another option as @Julien Jeannot mentioned is Subject-to. If you haven't already, I'd recommend checking out Pace Morbys YouTube channel. You can get a YouTube University Degree in creative finance for FREE.

Good luck on the journey and reach out if you want to talk more.

Scott E. · Answer

Another vote for a house hack deal here. I started with a single family home. Used an FHA loan, put 3.5% down. Then I had roommates who almost paid my entire mortgage, allowing me to live "for free."

An even better option is to buy a duplex, triplex, or a fourplex. This way you have your own personal space and don't need to share your living room, kitchen, and bathroom with your tenants.

Brandon P. · Answer

Yes, my wife and I house hack now, but our next one will be a du-triplex so we can have some privacy. But do what you can in the beginning to get in the real estate game! :)

Julien J. · Answer

Agreed on the house hack! Chat with a solid lending broker to see what you qualify for or start grinding on finding a sub-to.

Scott E. · Answer

Yes we do!

Do I need 20% down payment on an investment property?

Do I need 20% down payment on an investment property?

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