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Subject:  Re: Purchase a Rental Property Date:  12/30/2012  6:38 PM
Author:  Dwdonhoff Number:  13670 of 14211

Hi Charmaine,

How much down payment should I really put down?
As little as you can qualify to get away with. Down payment cash in real estate equity is functionally dead money; Its not going to give you any returns/savings, and if its critically needed it is illiquid and expensive to re-access (if accessible at all.)

Find out what loan programs you qualify for with the least amount allowed down, and calculate your buying budget upwards from those program parameters.

How much debt should I really take on?
As much as (and no more than) your reliably safe income can cover, and your established reserves are sufficient enough to cover a time lapse of payments.

SO... putting the previous two questions together;
1) as little down as possible,
2) as low of payments as possible (as long of amortization as possible,)
3) determine the loan amount relative to the constraints of yoru discretionaly cashflows and reserves... not the other way around.

Is it ok to save for the down payment in the form of stock?
Sure... but it exposes you to volatility which is a 2-edged sword. The stocks may do great and get you your beach home sooner, or they may do lousy & the only sound of waves you'll hear is the toilet flushing of your down payment money.

What other questions should I be asking?
There are many different kinds of beach communities... some are basically longterm residential communities like you'd basically find anywhere, but some are substantially vacation rental communities. If you are shopping to buy as a permanent long term resident, be sure to suss out what the majority of the rest of the occupants are as well. Being a long-term resident in a vacation renter community is not the kiss of death... but it puts an entirely different flavor to the community and your neighborhood experience... so make sure you are sure you'll feel good about your experience 5-20 years into the process.

Dave Donhoff
Leverage Planner
(San Diego (La Jolla & Mission Beach) bum for 9 years... and likely to return, like a grunion!)
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