Down Payment

The initial equity payment made when purchasing a property, typically expressed as a percentage of the purchase price. Investment properties usually require 20-25% down payment, compared to 3-20% for primary residences.

Key Points

Understanding down payment is essential for evaluating real estate investments
This concept helps investors compare opportunities objectively
Our Free Snapshot tool automatically calculates relevant metrics for any property

Related Terms

Loan-to-Value (LTV)

The ratio of the loan amount to the appraised value of the property. LTV = Loan Amount / Property Value × 100. A 75% LTV means you're borrowing 75% of the property's value and putting 25% down.

Leverage

Using borrowed money to increase the potential return on investment. Leverage amplifies both gains and losses. A property bought with 25% down has 4x leverage, meaning a 10% property appreciation creates a 40% return on equity.

Closing Costs

The fees and expenses paid at the closing of a real estate transaction, typically 2-5% of the purchase price. Includes loan origination fees, title insurance, appraisal, attorney fees, and prepaid expenses.