How much to put to down to get the BEST returns?

[Tom Smith]

How much to put to down to get the BEST returns?

Should you always put in 20% down, or is there another percentage to put down to get the best returns? 

Let's use an example:

$80k purchase, $1,200 rent/month. Total interest would come out to $56k over 30 years. Is it better to buy this condo/house all in cash, better to finance with 20% down, or finance at another percentage? 

Would it ALWAYS be best to finance with just 20% down? Does it depend on how much money you have? Let's say you have 1 million dollars and are buying a $80k purchase, should you still only put 20% down or should you just buy the whole property with cash? 

[Steve Vaughan]

Originally posted by @Tom Smith:

Originally posted by @Caleb Heimsoth:

Theoretically the less you put down the more your returns, so to your answer your question as little as possible.

Now in reality I wouldn’t recommend this. I’d say 15-25 percent is a good amount to avoid overleverage

 I don't get how you get more return with 20% down compared to more down with all of the interest payments you pay over the life of the mortgage. Wouldn't this be like saying to finance a car by putting 20% down instead of buying the car 100% with cash? 

I think Caleb is referring to a higher cash on cash return or COC. The less down, the higher return per dollar invested.

I like 20% down. Just enough to avoid PMI, which is a total waste at $75/mo per $100k borrowed.

If I could find stable assets like you mention that are 1.5% producers I'd buy as many as possible at today's resi rates. The interest paid over time will pale in comparison to your wealth growth with leverage there. Get 5x as many houses than paying all cash to save 5% a year.

But  not all debt is the same. Don't get me started on commercial. Shorter terms, adjustable and callable, waking you up from your nap to report your financials every year.  I put a lot down on those and pay off as quickly az possible.

Long term resi mortgages should be levered at 80%ish LTV whenever it makes sense if you plan on expanding.