Recommended down payment on an investment property

[OolloO]

I've heard that putting down the least amount for an investment property is recommended?

Smallest Down Payment
PRO

• Mortgage on investment property is tax deductible
• Interest rates are so low that you can't get a better loan (eg. putting your money else where)
• If interest rates rise you have the option of putting 20% down at any time with most banks

CON

• Reduced or negative cash flow

Increased Down Payment
PRO

• Positive cash flow

CON

• Money can be put somewhere else,hopefully making more than the mortgage interest rates
• Taxes on positive cash flow as it is income.

Suppose that the person in this situation has the money to put as large of a down payment as they would like.

Any additional pros or cons I've missed?

Thoughts or suggestions would be appreciated

 

[BrianPersaud]

There are number of tax and financial planning issues. I suggest calling an investment focused mortgage broker to get a clear picture. DM and i'll send you some names

 

[myblissfulhome]

I've heard that putting down the least amount for an investment property is recommended?

Smallest Down Payment
PRO

• Mortgage on investment property is tax deductible
• Interest rates are so low that you can't get a better loan (eg. putting your money else where)
• If interest rates rise you have the option of putting 20% down at any time with most banks

CON

• Reduced or negative cash flow

Increased Down Payment
PRO

• Positive cash flow

CON

• Money can be put somewhere else,hopefully making more than the mortgage interest rates
• Taxes on positive cash flow as it is income.

Suppose that the person in this situation has the money to put as large of a down payment as they would like.

Any additional pros or cons I've missed?

Thoughts or suggestions would be appreciated

Some of my clients found it useful to pay the entire amount in cash. It strictly depends on your personal financial situation. Personally I would like try to get myself into a positive cash flow BUT not everyone has the funds up front. Though I wouldn't wait if the right investment came along.

Always remember to account for vacancies and repairs. To me that the the most important factor when buying. Treat yourself like a condo and a building yourself a reserve fund

 

[James]

Just to clarify, your mortgage on your investment property is not tax deductible, only the mortgage interest is. Also, lending institutions would require a minimum 20% down payment on an investment property, so that should be your "small down payment" scenario.

 

[ponyboy]

you do pay income tax on the income from the investment property, but consider that it is pre-tax income while most income from other investments has already been taxed at some point prior. You pay income taxes at one point or another, either before you invest or from the cashflow of the investment.