One of the major, major advantages of real estate investing is the proper use of leverage. I’ve long been a proponent of purchasing rental properties that will “hold their own” with as little money down as is possible. In other words, if the property will break-even after all actual expenses at 10% down, then that’s all you should put down.
If the neighborhood has more possibilities for future growth and it takes 20% down, then that’s okay. But keeping your investment property properly leveraged has long been a benchmark that I strive to help my clients achieve.
Now days, however, we need to do additional math. I had a client quoted as much as .5% less on his mortgage and 1 point less on his fees if he went from 20% down to 25.1% down. That’s huge.
These are fluid times. And fundamentals do not change in times like these. But minor adjustments and tweaks do need to be weighed. I didn’t say to everyone to start putting down 25% on homes that may very well hold their own with 10% down. I did say to do the math.
Due diligence should be a part of every real estate investment.
BBQ Capital | Kansas City Real Estate Investing 