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Money Guy Show
How Much Should You Put Down on a Rental Property?
Sep 18, 2023
The podcast discusses the importance of the down payment on rental properties, considerations for car loans and Roth IRA contributions, deciding whether to prepay a mortgage to eliminate PMI, and the significance of keeping an emergency fund in cash.
22:06
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Quick takeaways
- Putting 20% down on a second home when planning to rent out the first home protects the equity and value of the first home and demonstrates financial stability for owning rental properties.
- Once you reach the 25% savings threshold, consider investing in low-cost ETFs instead of prepaying the mortgage to eliminate PMI, taking into account market conditions, potential appreciation, and refinancing options.
Deep dives
Importance of Putting 20% Down on a Second Home
It is important to put 20% down on a second home when planning to rent out the first home. This helps protect the equity and value of the first home and ensures an affordability decision. While it may seem tempting to put only 5% down on the second home and rely on rental income to cover expenses, it is crucial to consider the risks involved. Opting for a 20% down payment demonstrates financial stability and readiness for owning rental properties.
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