20% or 3.5% down for my first multihome?

[Milena Blanch]

I recently sold my townhouse and made about 90K and am ready to invest on my first multihome (Florida market, planning on self managing as I am just starting out) Should I put down 20% down to make more profit (no pmi) and later on get a heloc to reinvest in more properties or use the fha loan for 3.5% down, I am thinking of house hacking at first and use the remaining money to invest in a couple more properties (less profit due to pmi)? 

[Brandon Rush]

Hey Milena,

Congrats on your profits made off your townhouse. My biggest question is how will the property cashflow at 3.5% down if you decide to no longer reside in the property? While you will immediately benefit from saving on living costs by living there, you need to make sure it will cashflow like a normal investment property once you leave the property. If there is little to no cash flow after leaving, you may want to consider a higher down payment. 

Another thing to think about is what alternatives do you have other than a conventional 20% down owner occupied loan or a 3.5% FHA loan. There are some products out there which sit in the middle such as 5-10% down payment conventional loans which have PMI until you reach 20% LTV, and then PMI can go away. These loans are also cheaper than FHA loans which have some significant upfront fees.

Lastly, if you can find a way to get in with as little down and cashflow at the same time, that is my recommendation. Its always nice to have cash on hand for other projects and also reserves.

Good luck on your journey!