Down Payment

A down payment is the cash you contribute upfront toward a property’s purchase price. It lowers the amount you need to borrow and becomes your initial equity in the deal. In simple terms, it is the portion you pay now so you can finance the rest over time.

For investors, the down payment matters because it directly influences loan size, monthly payment, and overall deal risk. A larger down payment typically lowers the loan-to-value (LTV), reduces debt service, and can make lender approval easier because the lender has more protection. A smaller down payment increases leverage, which can improve cash-on-cash returns when the property performs well, but it also raises the monthly payment and leaves less margin if rents dip, expenses rise, or vacancy increases.

Choosing the right down payment is a strategy decision, not just a minimum requirement. Investors often evaluate multiple scenarios to see how different down payments affect cash flow, DSCR, and cash-on-cash return. The goal is to find a balance where the property’s income comfortably supports the payment while your cash remains available for reserves, improvements, or your next investment.