That way, you have built in equity and a cushion in the event of a correction. 

It also builds in a 10% emergency reserve fund based on the rehab budget to provide a cash cushion if a house later is found to need more work or a cost overrun etc.

You could also put in the work and wholesale until you have a cushion and 20% down to do your next deal. 

Make sure you have plenty of cushion in your numbers because as a first time investor, your construction/rehab budget is likely going to be off, and on the low side.

I agree with the previous poster that this probably isn't going to be a long term rental anyways, so this extra will just add a cushion to your turnover costs.

My partners and I have a 5 year plan, so I went with 7 year balloon to give us cushion.

I personally inflate this number to give me some cushion.

Unfortunately he had an electrical issue ( that engine must not have mags ) but anyone total power failure coming from Truckee one day he was just entering the 45 and of course  could not make the run way.. and landed in the vineyards which cushioned his controlled crash landing.. minor injuries he was lucky.. plane was totaled though.. 

@Shay SinghAs a first time investor, start with single family rentals. you can buy using turnkey or MLS route.your local area can present opportunities and you can join local REA groups to educate yourself more.Recession in housing market is given and if you are tapping your line of credit as a down payment, you are leveraged to the hilt. to make $4k net a month, you will need to generate $6k after prop mgt fees and keep a cushion of $2k a month for repairs.real estate investing is great but have to acknowledge that repairs are always needed as you scale portfolios.look into midwest and midsouth areas. lot of reputable turnkey providers and realtors on BP. i am sure you will connect to the right source and start your journey.

Problems I never expected outlined below.With that said, I always keep a healthy cushion available. on it.