20% or 30% Down? What Changes Your Rental Cash Flow

Putting less money down can leave more cash in your bank, but it also means a larger loan. Let’s follow one fictional rental through two financing choices.

The purchase price is two hundred fifty thousand dollars, and monthly rent is twenty-four hundred dollars. After a five percent vacancy allowance, we have twenty-two hundred eighty dollars of income. Subtract seven hundred dollars of operating costs and a one hundred twenty dollar reserve.

With twenty percent down, the loan is two hundred thousand dollars, and principal and interest are about twelve hundred sixty-four dollars a month. With thirty percent down, the loan falls to one hundred seventy-five thousand dollars, and the payment is about eleven hundred six dollars.

The modeled cash flow rises from about one hundred ninety-six dollars to three hundred fifty-four dollars a month. But the down payment also rises by twenty-five thousand dollars. Include closing costs, repairs, and initial reserves before deciding how much cash you need.

Taxes, insurance, and mortgage insurance, when required, still matter. If your lender escrows taxes and insurance, do not count those bills twice. This example assumes no mortgage insurance. Get the actual payment, rate, and terms from your lender.

In ProformaPilot, choose Residential Rental Analysis, enter the property and purchase financing, and review your monthly budget. Change the down payment, check the effect, and save versions you want to compare. Start with the free example at ProformaPilot dot com.