Starting Out
Market News & Data
General Info
Real Estate Strategies

Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal


Real Estate Classifieds
Reviews & Feedback
Updated over 19 years ago on . Most recent reply
is this bad idea? negative cashflow with equity loan
a newbie here. I'm interested in buying a rental investment property. My brother started his investment 2 years ago and he's doing pretty good. He has recommended to take the equity loan as much as I can from my first house and make smallest possible down payment on the 2nd house. His logic is that if I get comfortable with being a landlord, I will have extra liquid cash in the bank to buy 3rd house for rental. He says if I use up the cash, I will have to take another loan down the road.
So here is the data:
- equity on the 1st house is about 100k
- I'm looking at buying the 2nd house for around 350K
- I have good credit score around 790
- I have saving of $40,000
Based on the calculation, I will break even with my cash flow if I make 25% down payment on the 2nd house. If I do 80/15/5, I will deplete ~ $400 every month, but I'll have over 100k usable cash.
I'm not sure whether to make big down payment to minimize the monthly cash bleeding or keep the cash as much as I can in the bank for 3rd house. Or meet some where in the middle?
I'd appreciate any thoughts/feedback.