What would you do?

[Kevin S.]

Hi BP members,

I am looking to invest in a SFH that cost about $400,000. With 20% down the property will negative cash flow $500/mo. It breaks even @40% down. One lender advised me it's better to negative cash flow if I can afford it and still do 20% instead of 40%.

Reason : the additional 20% or $80,000 is better spent towards down for another property (provided of course I can afford twice the negative cash flow) because the annual appreciation @ 5% (which is likely in Florida) will be greater than the negative cash flow per year.  That is $6000 negative cash flow for $20,000 appreciation in return.  That is still a 17.5% return(capex not included).  I don't discount the possibility that the lender gets to finance 2 properties instead of just one but the proposition does make sense on paper and in theory. Does anyone refute this or agree with it?  Am I missing anything?  Thanks in advance.