Investment Property Downpayment Requirements

[Brian Jacobson]

I just got myself into a bit of a bind, that I'm sure I can get out of, but am looking to this BP community for some insight on our collective experiences.

Details:

Two 3-plex properties located on the same "lot" in Portland, OR.  Because they are both 3-plex properties, as opposed to a 6-plex, I have favorable lending options.  However, in talking with my banker, he assured me that a 20% down payment is all that was required.  I did my research, came up with the money (much of it hard money at 5%), and got the deal under contract for $110k/unit - which is a steal in Portland!

The issue is that I found out shortly after submitting my earnest money that this particular bank actually requires 25% down.  I have the money, but JUST BARELY.  I would have zero contingency funds, and nothing leftover for some of the rehabs that are needed to get the units into the type of shape I would actually feel good about.  Not to mention that I would have to carry a balance on one of my credit cards for the first time in almost a decade to make this work.  Far from ideal.

So my question:  Is 20% really the requirement across the board?  Or just at this one particular regional bank?  I'm sure everything will work out fine in the end, as it always does, but I'd love to hear some of your input on this topic.

Thanks all,

Brian

[Brent Coombs]

@Brian Jacobson, you said: "in talking with my banker, he assured me that a 20% down payment is all that was required". Er, you forgot to get that in writing, didn't you(?)

Hopefully none of your other numbers will be out of whack, but maybe in future a slightly more conservative approach would be a good thing to keep in mind when you are thinking of skating so close to thin ice?

HML charging only 5% seems very good. And having to dust off your Credit Card might motivate you to keep close reign on those expenditures (but then paying it off quickly will have the benefit of helping your Credit score)? All the best...