Invest Series: How Much Money Do You Need Upfront?

If you’ve ever caught yourself running the math on a rental property at 11 p.m., wondering whether you should actually pull the trigger, you’re not alone. It’s one of the most common conversations I have.

So for the next five weeks, I’m tackling the five questions I hear most often from people thinking about their first investment property. One question per email. No jargon, no hype, just the things I wish someone had walked me through the first time around. First up…

How much money do you actually need upfront?

The honest answer: probably more than you think, but less than you fear.

The down payment

For a non-owner-occupied investment property, you can put down as little as 15% with the right lender and a strong financial profile.

More commonly, you’ll see 20–25% required, especially on multi-unit properties or if you want the best interest rate. Putting 25% down often unlocks meaningfully better terms than 15%, so it’s worth running both scenarios side by side.

(One asterisk: if you’re willing to live in one unit of a 2–4 unit building, you can qualify for owner-occupied financing and put as little as 3.5–5% down. That strategy is called house-hacking, and we’ll touch on it in week 4.)

Closing costs

Plan for another 2–3% of the purchase price in closing costs, including appraisal, title, lender fees, inspections, prepaid taxes and insurance. On a $300,000 property, that’s $6,000–$9,000 you’ll need at the table on closing day.

Cash reserves

This is the one most first-time buyers forget. Lenders want to see that you have 2–6 months of mortgage payments sitting in reserves after you close. They don’t take this money from you, they just need to know it’s there before they’ll approve the loan. Cash reserves can be sitting in a retirement account.

The real numbers

Here’s what a typical first deal looks like on a $300,000 rental:

Down payment (20%): $60,000
Closing costs (3%)*: $9,000
Reserves (4 months of PITI at ~$2,200/mo): ~$8,800
Total cash needed: roughly $77,800

* Closing costs can be negotiated for seller to pay part or all

With aggressive financing and a strong file, you could get closer to $60K. With a more conservative lender or a higher-price property, you could be looking at $100K or more.

The takeaway

“Down payment” is the number people fixate on, but it’s only part of the picture. When you’re saving toward your first property, save toward the total: down payment + closing costs + reserves. If you only save toward the down payment, you’ll get to the finish line and find out the finish line moved.

Next week, we’ll get into the second-biggest question: how to tell if a property’s numbers actually work and which of the popular rules of thumb are worth paying attention to.

If a friend or coworker has been talking about getting into real estate, feel free to forward these along — that’s the best compliment you can give me.