When working out a deposit for an investment property, how did you decide how much cash to leave untouched?
A bigger deposit means borrowing less, but I’m wondering how people balance that against having money available if the property is vacant or needs repairs soon after settlement.
For a simple example, suppose someone has $100,000 available after allowing for purchase costs. They could put $80,000 towards the deposit and keep $20,000 aside, or put in $90,000 and keep $10,000. These are hypothetical figures, just to explain the trade-off.
I’ve been thinking more about this while looking into general financial planning and cash reserves, including some reading on Finance Nest Blog. It made me consider how keeping money accessible can be just as important as reducing borrowing costs. With an investment property, though, I imagine the calculation becomes more complicated because unexpected expenses and rental income gaps can happen at the same time.
I’d want to compare the loan costs under both options, but I’m less sure how to judge the cash buffer. Did you base yours on several months of repayments and property expenses, or work through specific problems you might need to cover?
For anyone who has been through this, was the amount you kept enough? I’d be interested to hear what you included in the calculation and what you overlooked.
This is always a fine balance between maximizing your deposit and leaving enough breathability. With rate fluctuations and rising construction/repair costs, what’s everyone’s current ‘sweet spot’ figure for liquid cash post-settlement?
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