So how much cash are you willing to put down?

Washington, District of Columbia
Buying & Selling Real Estate
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So how much cash are you willing to put down?

John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 798 votes

Everyone is complaining about cash flow, but the truth is everything cash flows.  It's a matter of how much you want to put down on the property.  Even if you are doing a value add deal you most likely want some initial cash flow on the deal.  How are you coming to terms with putting more down?  Are you waiting it out, offering less, or putting more down?  What say ye?

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Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
3y

For me personally it's about the ROI - if I put down 20k, I want to net at least 2k per year or 10%

I do deals occasionally where I'll trade lower cashflow for a higher equity capture at purchase - for example my ROI my be 5% but I'll pick up 15-20% in equity

That being said - I typically try to put down the LEAST amount possible - for 2 reasons - (1) it allows me to scale faster since all my capital isn't in one deal and (2) the tenant is paying the mortgage anyway so I don't necessarily need a lower mortgage payment since the tenant is paying that for me anyway

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    I put 35% down on my last 2 properties.

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    5Reply
  • Jeremy Horton
    Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
    3y

    For me personally it's about the ROI - if I put down 20k, I want to net at least 2k per year or 10%

    I do deals occasionally where I'll trade lower cashflow for a higher equity capture at purchase - for example my ROI my be 5% but I'll pick up 15-20% in equity

    That being said - I typically try to put down the LEAST amount possible - for 2 reasons - (1) it allows me to scale faster since all my capital isn't in one deal and (2) the tenant is paying the mortgage anyway so I don't necessarily need a lower mortgage payment since the tenant is paying that for me anyway

    7Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Putting more money down to cash flow is how fake investors buy property. Finding deals and structuring them in ways no one else can is what makes us real estate investors.

    4Reply
  • Alex Petsopoulos
    Investor · Alexandria, VA · Member since 2021 · 27 posts · 16 votes
    3y
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?


     Im putting that much down so I dont have negative cash flow 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    3Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Russell Brazil:
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?


     Im putting that much down so I dont have negative cash flow 


     100 % the same here. 

    The 10% down for rental is long time gone. Higher interest rate forcing us to pay more into debt financing hence adding more cash is suitable.

    1Reply
  • Callaway Pate
    Real Estate Agent · Washington, D.C. · Member since 2022 · 37 posts · 15 votes
    3y

    Because so much equity can be captured from value adds in DC, as long as the property doesn't have negative cashflow its not a deal breaker. Honestly, if it's cashflow someone is looking for I think it's better to just go up to Baltimore county (even though tenants out there can be a headache). High CoC properties in the DMV seem few and far between if you're doing traditional LTR. If anyone is making it work though I'd love to learn about it!

    0Reply
  • Alex Petsopoulos
    Investor · Alexandria, VA · Member since 2021 · 27 posts · 16 votes
    3y
    Quote from @Russell Brazil:
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?


     Im putting that much down so I dont have negative cash flow 


    Okay, gotcha. What range of CoC returns are you getting with that downpayment?

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?


     Im putting that much down so I dont have negative cash flow 


    Okay, gotcha. What range of CoC returns are you getting with that downpayment?

    Around 0%
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    WebsiteView Page
    3Reply
  • Alex Petsopoulos
    Investor · Alexandria, VA · Member since 2021 · 27 posts · 16 votes
    3y
    Quote from @Russell Brazil:
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:
    Quote from @Alex Petsopoulos:
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.


    In our current market, does CoC return actually improve with a higher downpayment? Or, are you putting 35% down to mitigate risk?


     Im putting that much down so I dont have negative cash flow 


    Okay, gotcha. What range of CoC returns are you getting with that downpayment?

    Around 0%

     Okay, so breakeven cashflow for a long-term equity play I'm assuming.

    0Reply
  • Jason Nguyen
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    3y

    I put 20% down on my last property. Regarding the cash flow, especially in the Northern Virginia market, I target medium term rental and it cash flow very well compare to long term. 

    1Reply
  • David F.
    Member since 2018 · 113 posts · 135 votes
    3y
    Quote from @Russell Brazil:

    I put 35% down on my last 2 properties.

    I'm with Russell Brazil. I just put 35% down and cash flow $0 after all expenses on a SFH. I bought it from a wholesaler, and wouldn't be buying the house unless I am buying at a discount that I am OK with.

    Mortgage rates make CF tough, so I’m focusing on my 2 day jobs to earn more money for downpayments. I like my jobs though, so I might be different than many on BP. Some investors might scoff at that big of a downpayment, but it’s what I gotta do to break even.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @John McKee

    I will put 100% down if it means getting a great deal.

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    6Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    3y

    @John McKee great questions! It really depends on the size of the deal, interest rates, terms, rents.

    0Reply
  • Ika Sargeant
    Real Estate Agent · Reston, VA · Member since 2017 · 295 posts · 163 votes
    3y

    @John M. A very interesting question and even more interesting how different investors arrive at their decisions. Sometimes there is not enough money and you might still want in. 20% is a hefty amount.  Ideally I like 20% and plus, hoping it gets me a break even or cash flow but I also think more money required to cash flow is indicative of a tough market. I also think how much people put down is tied to how they assess opportunity cost. Is my money better spent somewhere else?? I would consider a deal with a negative cash flow initially(no longer than 2years) if I think there is a windfall.

    1Reply
  • John M.
    OP
    Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 798 votes
    3y

    @David

    @David F.

    David,

    So what is your strategy with the property?  Are you flipping it because you got a discount or are you just holding for 30 years to let your tenant pay down/earn your equity.  Personally I'm a cash flow investor so if I was in your shoes I would flip it.

    0Reply
  • Jack Seiden
    Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
    3y
    Quote from @John M.:

    Everyone is complaining about cash flow, but the truth is everything cash flows.  It's a matter of how much you want to put down on the property.  Even if you are doing a value add deal you most likely want some initial cash flow on the deal.  How are you coming to terms with putting more down?  Are you waiting it out, offering less, or putting more down?  What say ye?

    Obviously the point of real estate is the leverage, with no leverage you’d be better in an index fund or even arguably some bonds, high divided stocks. Now obviously even at 50% leverage real estate should probably outperform other asset classes, but then you get down to your market and the appreciation potential (the fact that prices are up so much implies less growth moving forward) and basically the headache factor in the sense that if the returns in an bond/index fund are similar it’s obviously even more passive the r/e. So I think when rates were low real estate made sense, now it’s more where you draw that line personally, for me it’s somewhere around 30% if I think I’m getting a decent deal long term, not overpaying for the property.

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @John M.:

    Everyone is complaining about cash flow, but the truth is everything cash flows.  It's a matter of how much you want to put down on the property.  Even if you are doing a value add deal you most likely want some initial cash flow on the deal.  How are you coming to terms with putting more down?  Are you waiting it out, offering less, or putting more down?  What say ye?

     ALL my deals, flips and purchases ( abut 500 of them ) have all been cash. 15- 20% net caps gets me out of bed :) 

    just picked up a 7 unit, all in 200k, with about 49k gross net about 35k

    2Reply
  • Alan AsriantsBusiness Member
    Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
    3y

    all depends on my return. if I can leverage a better return using less money down then I would go with that route. Im young, so I am not in a possition to be putting crazy amounts down and need to focus more on how to use leverage to acquire more properties and cash flow. 

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    0Reply
  • David F.
    Member since 2018 · 113 posts · 135 votes
    3y
    Quote from @John M.:

    @David

    @David F.

    David,

    So what is your strategy with the property?  Are you flipping it because you got a discount or are you just holding for 30 years to let your tenant pay down/earn your equity.  Personally I'm a cash flow investor so if I was in your shoes I would flip it.

    @ John McKee

    I’m hoping to hold for 30 years and have the renter pay down the mortgage.

    I learned something new on this deal. For a cash out refi (after buying cash), by getting a 60% LTV mortgage, I got 6.375 rate, where instead a 75% LTV would have been low 7s. Nice bonus since I was gonna have to put more down in order to CF $0 anyways.

    1Reply
  • Tony Ngo
    San Gabriel Valley, CA · Member since 2022 · 26 posts · 9 votes
    3y

    It's depend on the market you in.  In CA, a good 25% down payment (remember 25% down has less cost on lending compared to 20% down on investment property) would give you break even or a little negative on property tax for long term rental.  But you will get good appreciation when you purchase in good area.  If you are creative, you may break away to get even.  Think of long term that within 2-3 years, the rent will increase which will give you cash flow.  Or you can get into short term/mid term rental then you can possible get cash flow.  

    0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    We do commercial.  Closest we come to housing is developing and selling subdivision lots.  No houses.

    Following the logic to see what we can pick up.

    High interest rates, high inflation, housing shortage.     

    Interest rates-  we don’t do any investing at 9%.  The only deal at 9% is if we develop Selfstorage and sell in 2 1/2 years or our subdivision lots.  At 7% we analyze more in depth and look for value add and lower risk.  We could invest at 7% with a business plan to refi at 5% in the future.  That increases the risk though. 

    Inflation- cumulative, not year over year.  If 10% over the next 2 to 3 years then that works.

    Housing shortage- won’t be made up in the next few years.  Prices should have upward pressure over the next few years even if downward short term.  Also the market is local. Our subdivision lots are 2 to 8 acres in the country. We see a market for people moving out of the city.   Not every one.  

    So breakeven now might work later.  We are still sitting on the sidelines until this fall/winter until we make our next investment.

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    100% if I get a good price. It really depends on all on the purchase price, from there I decide how much I want to put down.

    Anyone putting down less than a fair share right now isn't making money or buying garbage property and calling themselves "investors" when they are really just warehousing full risk with little reward. Anyone with the mindset of leverage till you die and full scale, will really eat dirt these upcoming years. That's the game plan of 08-22, but not now.

    2Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Jack Seiden:
    Quote from @John M.:

    Everyone is complaining about cash flow, but the truth is everything cash flows.  It's a matter of how much you want to put down on the property.  Even if you are doing a value add deal you most likely want some initial cash flow on the deal.  How are you coming to terms with putting more down?  Are you waiting it out, offering less, or putting more down?  What say ye?

    Obviously the point of real estate is the leverage, with no leverage you’d be better in an index fund or even arguably some bonds, high divided stocks. Now obviously even at 50% leverage real estate should probably outperform other asset classes, but then you get down to your market and the appreciation potential (the fact that prices are up so much implies less growth moving forward) and basically the headache factor in the sense that if the returns in an bond/index fund are similar it’s obviously even more passive the r/e. So I think when rates were low real estate made sense, now it’s more where you draw that line personally, for me it’s somewhere around 30% if I think I’m getting a decent deal long term, not overpaying for the property.

    The point about real estate isn't leverage. Is this the logic we really think here? I hope the best for a lot of folks, genuinely. This mindset is just entirely detrimental to novice folks or without deep pockets. 

    The point about real estate is owning an asset that'll exceed returns elsewhere, and has the potential to supersede. Basic above average return I could take a note risk,  the physical risk opens me up to extreme upside. I want that-- very few assets have that extreme upside ability. 
    1Reply
  • Jack Seiden
    Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
    3y
    Quote from @V.G Jason:
    Quote from @Jack Seiden:
    Quote from @John M.:

    Everyone is complaining about cash flow, but the truth is everything cash flows.  It's a matter of how much you want to put down on the property.  Even if you are doing a value add deal you most likely want some initial cash flow on the deal.  How are you coming to terms with putting more down?  Are you waiting it out, offering less, or putting more down?  What say ye?

    Obviously the point of real estate is the leverage, with no leverage you’d be better in an index fund or even arguably some bonds, high divided stocks. Now obviously even at 50% leverage real estate should probably outperform other asset classes, but then you get down to your market and the appreciation potential (the fact that prices are up so much implies less growth moving forward) and basically the headache factor in the sense that if the returns in an bond/index fund are similar it’s obviously even more passive the r/e. So I think when rates were low real estate made sense, now it’s more where you draw that line personally, for me it’s somewhere around 30% if I think I’m getting a decent deal long term, not overpaying for the property.

    The point about real estate isn't leverage. Is this the logic we really think here? I hope the best for a lot of folks, genuinely. This mindset is just entirely detrimental to novice folks or without deep pockets. 

    The point about real estate is owning an asset that'll exceed returns elsewhere, and has the potential to supersede. Basic above average return I could take a note risk,  the physical risk opens me up to extreme upside. I want that-- very few assets have that extreme upside ability. 

     On average, houses go up 3-5% stock market is about 10% with no leverage you’d obviously be better in an index fund.

    0Reply
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