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Updated over 6 years ago, 07/08/2018
20% or 25% down on Rental Properties?
Fellow investors, I’d love your experienced input. I’m moving forward on my second rental property and I’m curious to know if you find it best to put down 20% and take advantage of as much leverage as possible or if you find 25% is better. I’m aware that more leverage generally gives a greater COC return however my theory is that putting 25% down minimizes potential risk/exposure and increases CF. The COC difference is about 1% less. Im looking at this from the standpoint of hedging my risk. In the event there is a total vacancy or potential repairs that are higher than expected I’d feel more comfortable knowing that my PITI payment is less. I’m also considering that in the event rents drop or home values decrease I’d still possibly be able to see positive CF. These are my thoughts however I’d love to hear from the pro’s here. Thank you in advance.
- Mike