Should I get a 0% down loan on my first rental property?

[Alonso Fernandez Maldonado]

Hello BP!

I'm in the process of deciding how I want to finance my first property and after talking to a few mortgage broker I narrowed it down to these options. I only have $12,000 in cash and I'm looking at houses around $250,000. 

1. Do it alone with a 0% down loan, even though it would have a big negative impact on my cashflow. (house hacking)

2. Do it alone with a 3% down FHA loan, even though after downpayment and closing costs I would have no cash left. (househacking)

3. Get a partner to put 20% down, have lower interests, and split all profits 50/50. 

I appreciate any help, suggestions, comments, etc. 

Thanks!

[JD Martin]

If you are house-hacking - i.e. this is a duplex and you are renting one side, for example - then you have to take into account the amount of money you should be paying for rent (or your mortgage) into the equation. 

Assume that you rent an apartment somewhere right now for $1000.

250k @ 5% no money down = $1400 mortgage. Let's add 400/month for taxes & insurance = $1800

Duplex rents @ $1250 each side ($2500 for the whole unit, assumptions). 

Your cost with no money down = -$550 + $1000 (rent savings) = $450 profit. Not including principal pay down.

This is overly simplistic, as it doesn't take into account vacancy, maintenance, repairs, HOA, utilities, etc but you should get the drift. Having a partner is not for the faint of heart. There's no real advantage to 0% vs 3% unless you see a big interest rate drop; otherwise keep your cash in your pocket.