Expensive market - how much downpayment is too much?

[April Laspinas]

I live in one of the most expensive yet smallest countries in the world - Cayman Islands. I’m a beginner in RE investing and up against cash buyers on million dollar properties in the market. So traditional lenders i.e. banks are not very friendly to newbies. 

I have analyzed tons of deals however conventional loans at 20% Downpayment hardly yields positive cash flow due to how expensive the market is. SFH averages 450-650k. My question is, if I can afford putting in 30-40% downpayment to yield positive cash flow, is the risk too high? That would mean putting in 150-250k in downpayment alone. Appreciation is likely due to relatively growing market but as a first investment I would like to get guidance on investing in expensive markets. There's no BRRRR market either due to how small our island is. House hacking is not possible for me as I have kids.

Do investors really put down that much downpayment in expensive markets?

[Garrett Crosby]

Hi @April Laspinas - thanks for the post! 

Out of curiosity - are you opposed to investing out of state? When I was first starting out in Los Angeles, I was running into similar issues with cash-flowing properties. At the time, I was just trying to do buy and holds, so I ended up investing in North Carolina. Once I built up my portfolio a bit, I started investing in my state (CA) once I had a bit more capital and experience. 

The answer to your question is a bit complex overall though. It does come down to cash flow and your investment strategy. If the numbers make sense, down payments don’t really matter. 

Happy to help any other way if you ever want to talk through things. :)