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Updated about 7 years ago on . Most recent reply
![Jonathan Taylor's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/909173/1647035569-avatar-jay_taylor.jpg?twic=v1/output=image/crop=2055x2055@103x0/cover=128x128&v=2)
Is Zero money down a smart move?
Hi Folks,
I'd love some feedback as I'm going through the motions for my first property and I'm not sure the best route to take.
I'm involved in a loan program that, if I wanted to, could put ZERO money down on a multifamily property. I would be living in one unit and renting out the others. I have been running the numbers on all the properties in the 700s for tri/fourplex and none are cash flow. Ill be be paying 800-1500 out of pocket.
I'm in LA, it just isn't happening at my price point. So here is my question.
Should I buy a tri/fourplex for $700-800,000 with zero money down, then buy an investment property elsewhere (probably long distance) with the money I had been saving for a downpayment?
OR
Should I put that money toward the down payment of the multi family to reduce my overall mortgage? Its only 50,000 grand so the downpayment doesn't affect my mortgage all that much.
What do you think? What other info is needed to make the best choice here?
Thanks In advance
JT
Most Popular Reply
![Ben Zimmerman's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/576494/1694627478-avatar-benz3.jpg?twic=v1/output=image/cover=128x128&v=2)
I don't think it's as bad as some people think since you will be living in one of the units. Owner occupied MFR's are often cashflow negative. It's rare to be able to 'live for free', with a triplex and have your remaining two tenants cover your entire payment, this is especially true with a 0% downpayment program in a very expensive market, often times it's just 'living for cheaper.' Remember to compare apples to apples and don't try to compare the negative cashflow of an owner occupied MFR at 0% down with that of a true investment MFR with all of the units rented and 25% down.
The missing piece is opportunity cost, since regardless of what you option you take you will still need to provide a roof for yourself. If you don't buy this, and chose to continue renting instead how much would you throw away on rent every month? I'm assuming you would be paying roughly 2k/month in rent, as that is what you are charging for each of your units that you are analyzing.
If you are living in a crazy expensive city such as LA, and have the option to provide housing for yourself by paying only 800-1500 / month, while slowly gaining equity and possible appreciation, all while using none of your own money to fund the deal, then that should be an easy choice. I would keep the remaining 50k of savings in a liquid investment that is semi safe as your emergency rainy day fund and continue to save and add to it as rapidly as you can to lower your risk.
Being cashflow negative 800-1500 isn't a bad thing if it means you are able to cut out 2000 worth of other expenses, it's called winning!!