High cashflow, large downpayment vs. Low cashflow, no downpayment

[Ivor Grisel]

Hey everyone,

My girlfriend and me are looking for our first rental property, using the overvalue on our own home. There are two possibilities. Both not certain, but want some of your insights for the consideration on how far to pursue them.

First option is an appartment that is already rented out and has 4 tenants. Cashflow will be about 580. But most likely we will have to add 15k of our own money.

This is versus an appartment which would have two tenants (son of a neighbour and a friend of his). Cashflow would be 250. But we could do it without adding any money.

So lets say that we want to buy another property in about 2 years, the second option makes more sense, because we would have 15k plus two times the year income. The first option would still be negative. But in the long run, the first option would generate more cashflow...

There is also an emotional side to this: the first option has tenants which we did not screen. The second we already know one of the tenants which is a great guy. Also, the second property will allow us to go through the whole buying and renting part, so would learn us more.

The other part is rentor protection. If the tenants of the first property would check the law, they would find out they are overpaying. They could force is to lower the rent. If that would happen, we would be screwed. That being said, the current tenants are not from our country and might not care/know their rights.

So that's the dilemma. We'll chase both options, but curious to know if I'm overlooking something. Any input is welcome!

[Theresa Harris]

If you can get into real estate with no extra money (option 2), that is a good option.  Just make sure you have extra money in case you have unexpected repairs or vacancies for the apartment.  The lower down payment also means you have more money for other units.