How much should I put down?

You're probably thinking "as little as possible".

That's probably true. But there's a trade off you should understand.

A higher down payment means you've got a smaller mortgage. A smaller mortgage means you're paying fewer dollars in interest and principal. Fewer dollars in interest in principal means more cash in your pocket.

But there's a flipside to this.

A higher down payment means each dollar isn't working as hard for you. Which means lower returns or a lower return on equity.

This is a real example of a 3-unit property in a large town just outside a city. I've modeled cash-on-cash returns, cashflow, and return on equity for the first three years. Note: mortgage rates are often lower when you put 40% as a down payment. That's also included in this example.

Cash-on-cash returns

Cashflow

Return on equity

Cashflow goes up as you put more down. Returns - whether cash-on-cash or return on equity - go down as you put more down.

How do you decide how much to put down? Go back and look at what you wrote for yourself using this post:

Getting started before you spend one dollar

It feels overwhelming to get going. It won’t be anymore.

Laziest LandlordLaziest Landlord

If you know your financial objectives you should know the answer.

Model the three year cash-on-cash, cashflow, and return on equity for yourself. You'll make the best decision for your circumstances.