PMI and down payment options

[Sebastian Villacis M.]

Hi BB community,

I'm new here and so excited to join this amazing community. My wife and I are 6-7 months out from getting our first investment property. We have a beautiful 9 month old baby girl which makes the house hack approach a bit more challenging but we are hopeful everything works out. We want to get a single family house in the Reston, Sterling, Herndon area in the 500k-600k ballpark where we can add an accessory dwelling unit that will be rented out (Airbnb or long term rental TBD). Our goal is really to stay in this first property for a year before we get our second one and house hack again. Based on this goal, our questions are on the financing part of the deal: 

1. For PMI, will it make sense to buy it out or to pay it monthly. The reason I'm asking this is because even though we want to buy and hold our properties and just rent them as we move to our next deals, the monthly PMI payment will still affect our expenses. I've heard that buying out PMI when you want to stay in the house for s long time will make sense but I don't know if that will still apply for the house hack idea considering we don't want to sell our properties so our portfolio grows as we go.

2. We have the chance to put 10% but watching lots of the BB videos we saw that the best (or most?) financing option is 5% down. I guess this question goes hand in hand with the first one since 5% down will mean a longer and higher PMI. Which rate will be better for the approach we want to take.

Thank you so much to everyone for being part of this post. We are so so excited and happy for being part of the BB community.

[Nicholas Coulter]

@Sebastian Villacis M. I always say pay the PMI monthly. Its normally very low with a 5% down conventional loan and if you add an ADU you might very well cover the 20% LTV with the additional value you forced on the home. If you can afford the payment comfortably use 5% and take the other 5 and start your ADU process. I think youll find the additional 5% down wont make too much head way on your monthly PITI.