How much of a down payment should I put on my primary residence?

[Mike L.]

Hi everyone,

I'm a new investor and I am looking to buy a primary residence as well as a (separate) investment property. I have the money to put down a large down payment on my primary residence, or possibly buy it outright, but should I?

I have heard some RE gurus advise not to use debt to buy anything that does not create income (i.e. doodads). And my primary residence would fall into that category.

But if I put a little bit down and take out a loan for the rest, then I could take advantage of the low interest rate, first time homebuyer specials (like FHA loans), and that would leave me more money to invest with.

I really don't know how long I would stay in this home - it would be a starter home and I would likely move out in a few years, and maybe rent it out for income.

I would like to hear your thoughts and advice on this. Thanks in advance.

Mike

[Vikram C.]

Many sellers will give a fairly significant discount if you are a cash buyer and can close quickly without a financing contingency. So it may be worth making low-ball cash offers on a few properties that you like and seeing if you can get a great deal and then refinance at a comfortable LTV and invest the proceeds into your investment ventures.

I once had a buyer who claimed to be a cash buyer, got a discounted price from me, and then went ahead and financed the deal. I did not object because he was able to close by the deadline and the financing contingency did not exist. So you can do this as well if the loan terms are better for an acquisition than a refinance.