Hi,We have offered on our first investment property and had the offer accepted! The property is 4 4-plexes which will be managed locally (we've already hired the mgmt co.) and will be quite positive if our projections make sense. Anyway, the numbers (per building, there are4):Purchase price: $123,000 Gross Rent: $425x4 units/bldg $1700 Mgmt fee: 5% of gross + 2% (our est.)for misc extra overhead: $119Taxes (CA): $154Reserves and maintenance at 10%: $170Insurance: $80Vacancy estimate based on previousowner and local census data of 5%: $85Cash flow before debt service: $1092The units are presently all rented and based on the mgmt co andlocal newspapers appear to be somewhat below market (they are 2/1'swith garages and laundry hookups, built in 1981).Now the question: our loan broker has found us an 80% LTV at 7%and a 90% LTV at 9.5% (with no PMI). Both fixed, and we qualifyfor both. The numbers here:Mortgage payment at 90% LTV: $931Mortgage payment at 80% LTV: $655Cash-flow at 90%: $161Cash-flow at 80%: $437Pre-tax ROI* on $12,300 at 90%: 15.7% (161x12/12300)Pre-tax ROI* on $24,600 at 80%: 21.3% (437x12/24600)*Yes, I am ignoring closing costs, but since they are fixed they aren't really material to the comparison. Also, I don't know quite what they are yet :)So, the question is should we basically double our down payment to increase our cash-flow by 271%? Friends of mine in the real-estatebiz, and the books I've read on the subject, basically seem to takethe line that you should down the minimum you can get away with andstill have true positive cash flow, so you can have cash available for future investing, since if the market is decent you'll be able to raise the rent and become more cash-flow positive over time, and can make money on other buildings. On the other hand, this is our first property, and I'd like to be "strongly" positive to start with so we aren't destroyed by our inevitable mistakes. Also, we aren't going to buy anything else for the next several months (at least), and even at 20% down, we still have decent e-funds and backup money. What do the investment pros think?Foobarista, going where he's never gone before...PS: I posted this to the RE investing board but got few reponses
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