10% down or 20% down???

[Adam Newman]

First time investor here, please bare with me! Tomorrow, I am meeting my realtor for a tour of my first multifamily house hack. It’s listed at $289k. I have $50k plus about 7k in the bank.

Closing costs are 2.5% - $7250. Seller and buyer commissions are a total of 6% - $17,340. This is my first time buying a home and let’s just say I learned a lot about these fees. Call it $25,000 in fees.

The downstairs unit will rent out for 2000 a month. The upstairs will rent out for 1750 a month. Property taxes are 650, insurance 160, outsourced property management takes 10% of the rent, and another 10% of the rent is set aside each month for future repairs. 3750 x 0.8 = 3000.

$3000 profit, minus about $2300 in mortgage, property taxes and insurance leaves about $700 cashflow, when I move out.

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What would you do? Is this potential $700 cash flowing asset worth it? If I put only 10% down, I would have just enough for a 10% down payment, plus all the fees, but the mortgage will go up to $2400 plus $150 mortgage insurance, leaving only $450 in cash flow. If I put 10% down, with on time payments, I’ll have 20% equity in about a year or so, eliminating mortgage insurance.

I think I may have just answered my own question, but is it worth it to put only 10% down, and waiting for the equity to build to 20% in like a year and a half, or to bend over backwards, take out a loan and go in with 20% from the start?

Oh, and I also qualify for an FHA loan, since this is my first home, so there is also that option to. Not sure what to do!!