Great sound bytes offer bad advice! "Put at least 20% down" the advice was promoted to protect the real estate investor and home buyers from the risk of declining home values. Well if you believe them you probably also believe the "non-profit" equals charity and that their staffs are philanthropic volunteers, there to generously help you.

Like the collection agencies posing as " non-profit credit counselors" all the while being paid generously by the banks, the advice to put more money down benefits the bank not the client!

The idea that equity needs protected is in itself a misnomer! If a property was purchased for it's function as apposed to a quick resale (Flipping) of what day to day value is equity? With little or no equity the bank assumes the risk with you. When you reduce your leverage to the point where the bank can recover their money you assume all the risk and the Bank has little or none, and no incentive to work with you.

If you bought a house as a "home" for your family, with a monthly payment of $1,000.00 and you still need a "home" what difference does it matter in the short term weather you have 50% equity, 20% equity, 5% equity, 3% negative equity, 7% negative equity, 25% negative equity, or even less equity? It's still the same house, the payment is still the same $1,000.00, it's still your "home."

Why do I site 3%, 7%, and 25% negative equity? Because for nearly two decades people have been buying and refinancing into those positions wisely and successfully! (Personally, I doubt the wisdom of the 125% LTV, but can't dispute it's sometimes successful.)

If you bought a property as a rental to produce cash flow and the cash flow remains the same or even improves of what value is equity in the short run?

Classic wisdom for pre-retirees has always been to leverage properties to the max. Yes there are limits, a person has to put enough down to qualify for the loan and have an affordable payment, and/or to maintain a positive cash flow. Still classily the advice to investors would be to highly leverage a lesser property rather than increase the equity to qualify.

If you are to buy a $200,000.00 "home" and you have a choice are you better off with 20% down or 5% and an extra $30,000.00 cash in the bank? If you don't have a lot of money are you better off renting or buying with little or even negative equity?.In one case you payment is fixed for the life of the lease in the other for the term of the loan If you're renting and face financial problems it takes as little as 5 days to be evicted. If a home owner has the same problems he's going to have 4 months to well over a year (the less equity a home owner has, the less the bank wants his house) before he finds himself on the street.

The truth about real estate is that the best time to buy remains as soon as possible! How much should you put down? Only as much as necessary! As it was for your parents and your Grandparents, so it remains.

Bill

William J Archambault Jr

The Real Estate Investment Institute