How the deposit affects cash flow

[Matt Donley]

I hear so much about how important it is to have positive cash flow when analyzing a property to buy and hold. What I don't hear is how the deposit you put down on a property affects the cash flow (by directly affecting the amount of money you need to borrow), and how that should affect your analysis. 

For example, let's say I have $20,000 to buy a $100,000 property, but can qualify for a low interest FHA loan that only requires a 3.5% down payment ($3,500). Since my mortgage payment will be relatively high, let's say this causes my analysis to show a negative cash flow.

On the other hand, imagine if I had chosen to put the entire $20,000 as down payment. My mortgage  payment would be lower, so let's say it's enough to provide me with positive cash flow. 

So what's the difference? Should I turn down the deal just because I plan on only putting 3.5% down, just so I can keep extra cash on hand? Why does the deal suddenly get better when I tie that $20,000 as equity into the house? Whether my $20k is in cash, or is tied up in equity, why should that affect my decision based off of the cash flow rule?

What if I was paying 100% cash for the property? Of course the property is going to cash flow better than if it had a mortgage. But the deal may actually be terrible if you calculate it with a mortgage. 

What am I missing here?

[Brad Saari]

@Account Closed @Matt Donley

 "initial cash flow is only required by poor people and poor investors". Bob how does that help the person that initiated this post in any way? Are you saying you are allergic to cash flow? If you want Matt to know the secrets of life perhaps post something that will help...tips for finding undervalued properties, how to add forced appreciation, areas that appreciate well, etc etc. Simply saying cash flow is for suckers is not productive.