Real Estate investing is a cash intensive game, and this is nowhere evident than in the requirement of a down-payment. Yes indeed, the overriding reality for most people is that financing the purchase of an investment property generally involves a sizable down-payment. More than that, unbelievably enough, a rather wide cross-section of real estate investors actually believe that making a down-payment is actually prudent in several ways…
Well, what can I say…down-payment and I – we have an interesting relationship; I respect it, but I think it’s stupid and unnecessary! Cash is an expensive commodity I am of the opinion that it should only be used to create more value than that which it stores in itself. For example, if I can use $10,000 to create $30,000 worth of value, then I do it. But, if spending $10,000 only creates $10,000 worth of value, then what’s the point?
Yes indeed, those of you who know me well know that I don’t like to bring money to closing. In fact, I specialize in Creative Finance with the aim of achieving 100% financing, or as close to it as I can get, on every deal that I do.
I THINK DOWN-PAYMENT IS STUPID AND UNNECESSARY, AND HERE’S WHY
There are very good reasons for this, which is the topic for today. In order to understand where I am coming from on this, we must first consider the 3 reasons for which people commonly feel that making a large down-payment is either necessary or desirable:
- Down-payment is required by the lending entity.
- Down-payment facilitates greater cash flow.
- Down-payment facilitates stronger equity position and safety.
Let me address all three…Please continue reading at BiggerPockets