How Much Should You Put Down on Your First Rental?

**Dave Meyer** (0:00)
What's the point of your first real estate deal? Some investors would say, you saved the down payment, you did the homework, now shoot your shot, maximize returns, and start the wealth building snowball. The flip side, though, is that you don't know what you don't know on your first deal. So you could play it safe, just get on base, and then push the envelope after you've gained experience. One of these approaches does build wealth faster on a spreadsheet, but not always in real life.
What's up, everyone? I'm Dave Meyer, here with Henry Washington. And today, we're dipping into the BiggerPockets Forums to answer your questions. Henry, how are you doing, man?

**Henry Washington** (0:44)
I'm doing great, man. I love answering forum questions because there are other people's problems that I get to help with, which is dealing with my own.

**Dave Meyer** (0:52)
So it's easier to give advice when it's not your problem. I totally agree with that.
Well, we got some great questions today. We're covering a lot, like the house hacking math. Most people get wrong. The moment it's time to 1031 out of a property and when to cut your losses on an entire market. But Henry, you got our first question cued up. What do we got?

**Henry Washington** (1:15)
Our first question comes from a BiggerPockets forum user named Justin, and he asks, I live in California and I've been looking at multifamily units in Ohio, Michigan and Wisconsin for my first investment. I will have approximately $100,000 within a few months. Would it be better to buy multiple multifamily units that are between 120,000 and 150,000 and put as little down as possible? Or should I buy multifamily or single family homes, but put 20% down?

**Dave Meyer** (1:45)
Okay. Well, first up, Justin, love the strategy here. If you live in California and it's expensive, invest in the Midwest. It's a great way to do it. Ohio, Wisconsin, Michigan, all have great places to invest. I do it. I live in the Pacific Northwest. Expensive here, hard to find cash flows. So I love the approach here. So then he's asking, do you buy multiple units and put less down, or buy fewer units, but put 20% down?
Justin, I got some hard news for you. You gotta put 25% down, just so you know if you're getting an investor loan out of state. Maybe if you're getting a DSCR loan, you might be able to put down less. But at least in my experience, I put 25% down. What about you?

**Henry Washington** (2:29)
Yeah, I've seen some 20%.
I've seen some 25%. It just depends. I like the thought process here. My default answer is, you've got to lean back on your goals, right? So if I have smaller goals, then I'm willing to put more down to get the cashflow upfront. If I'm trying to grow and scale quickly, then putting less cash in allows you to scale more quickly. But I don't know if that's the best move in this market, unless you've got a good level of comfortability and a good team in place to execute that. Because saying you want to buy two or three multifamilies and actually executing them so that they produce the return that you hope they would in this market, it could be challenging. So I think there's some other information you need in between there. What are your goals? Have you done deals in this area before? Do you have a team in place? Because if you're going to go and buy two or three multifamily deals in a year's time span, there's a lot that can go on in there that you've got to be responsible for in order for you to get that return.

**Dave Meyer** (3:35)
The title of this post that you read was First Investment. So the answer is he has not done these kinds of deals before. So I like this question because I feel like so many times when we get these, we have to answer them by saying, oh, it depends if you could do this. This one is easy for me. Buy one better condition, multifamily property. Put 25 percent down. It's your first deal. Your number one goal in your first deal is do not lose. Just don't lose your shirt.
The best way to lose your shirt is to buy what he's listing as multifamilies for 120, 150 grand unit. That's a cheap property for a reason. There is going to be problems. You don't know how to manage it.
You're going to invest out of state. I genuinely like the approach. Buy something easy for yourself. Learn what you like, build your team, gain some confidence, and then maybe in the future, you can buy cheaper properties. Maybe you just keep doing that, but you don't need to take that swing on the first one.