As part of our real estate investing ideas series, I wanted to make sure I covered a simple way to invest in real estate. It is simply put 20% or more down when you purchase a property. There are definitely many strategies when it comes to investing in real estate. There is one way that never seems to get a lot of press. Maybe it is too boring. I like this simple approach. In my area you are required to have a 20% down payment to purchase a non-commercial multi-family income property. That generally means a residential property up to 5 units. If you have the 20% down payment from savings it will benefit you in several ways.

Here are some of the ways it can benefit you:

• You have better odds of getting a lower / preferred interest rate at the bank.
• You may avoid paying fees such as CMHC fees that we have to pay on high leverage mortgages in Canada.
• You will decrease your total amount to finance which may allow you to shorten the term and pay it off quicker.
• You will reduce the amount of interest you pay.
• When you pay your mortgage off quicker you can reduce your debt service ratio. Lenders like when you have lower debt compared to your income level.
• You will decrease your amount to finance, so you can take the mortgage over the maximum allowable term and increase your monthly cash flow.
• It will likely put you in an equity position from day number one.
• A less stressful way to invest. You have better odds of being welcomed with open arms when you walk into the bank.
• Having higher cash flow can lead to less stress when it comes to finding money for maintenance and repairs.

I am not going to get into the disadvantages in this post. It really comes down to a choice based on your investment strategy. What I have noticed over my investing career is that people seem to talk a lot about the big gains, $0 down strategies along with refinance strategies to line your pockets. I do not see very much written about the people that put 20, 50, 75 or even 100% down on properties, pay them off quick and retire on the cash flow.

I have often heard people in various real estate meetings being ridiculed for even suggesting the idea. What ever you decide to do, come up with a plan, and work it. Do what works best for you and your situation.

Until next time,

Design your landlord experience,

Michael P Currie

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