How to structure my mortgage on first rental property help!

[Jenny M Valcore]

Hi All! I am in contract on my first SFH rental property and would like some feedback/advice/comment on how I should best jump into the loan on this property with my current financial situation... here are the details and thank you for any/all who comment and give advice!

Sale price $163,000 , - property needs approx 10-15k rehab to get market-rent ready.  [I have Good credit, not excellent, and I have 50k at my disposal to get this project going]

Conventional Loan for Rental Property. Requires 15 down at least.. 

Question.. should I put down 15% or  20% ?

1. Cash invested at closing @ 20% = 38,000 w/rate lock at 5.75% [cost .8 points] [[ $761 mo mortage/interest cost ]] 

[$12,000 left for rehab work  |  tighter budget restriction and greater cash flow potential, more money left in the deal, but greater potential to cash out or HELOC sooner ]? 


2. Cash invested at closing @ 15% = 31,500 w/rate lock at 5.75% [cost 1.8 points] [[ $829 mo mortage/interest & PMI cost ]]

[$18,500 left for rehab work | bigger budget for expenses and less cashflow potential, less money left in the deal, longer time to be able to refinance etc? depending on market.] 

Thank you all! 

[Greg Scott]

Generally, I would put the minimum down, but also prefer avoiding PMI costs.  You didn't indicate your amortization, but I also stretch those out for 30 years.

One concern I had on your note was your comment that your down payment will affect your rehab budget.  Those really should be independent ideas.  You should be fixing the property to the level required for your business plan.  There will always be some surprises so you also need a bit in reserves.  If you are so tight on funds, it would impact your rehab, you might want to rethink the strategy.  I've seen a lot of people get themselves in trouble by not having enough cash to complete the rehab.