A Rental or the S&P 500? I Ran ALL Four Down Payments

A $310,000 rental. Put 20% down at this week's rate and it pays you $0 a month. Pay cash and it pays you $1,692. And the same $62,000 in the S&P 500 is worth more than the house leaves you with in ten years, at the market's average. So I bought this one house four ways on paper (cash, 50% down, 25% down, 20% down) with the rent set so the 20% door is exactly a 1.00 DSCR, and ran every door against the same cash in the market. The down payment turned out to be the whole answer. In this video: • The four doors, with this week's DSCR rates by down payment (7.25% at 20% down, 7.00% at 25%, 6.625% at 50%) and the three-year prepayment penalty on all three loans • The lender's cash flow ladder: $1,692 / $699.52 / $145.17 / $0 a month, and the cash-on-cash ladder: 6.55% / 5.42% / 2.25% / 0% • Why every borrowed dollar lowers your return at today's rates: the house pays 6.55% on its price, a 30-year loan costs 7.68% to 8.19% of its balance a year in payments, and the rate where that flips is 5.15% • Your math, not the lender's: vacancy and repairs take $340 a month, the 20% and 25% doors cost money to own, and $2,667 of rent (a 1.18) fixes it • Ten years against the market: at 3% appreciation the S&P beats all four doors, by $254,375 at cash and by $28,193 at 20% down, and the growth rate where each door ties the market (3.73% at 20% down, 8.33% at cash) • The income test: $310 a month of dividends vs $1,351.95 from the paid-off house, and what the market gives you back (it sells in a day, with no penalty) • The tax layer, both sides, and what I'd tell you across the desk with $62,000 ⏱️ CHAPTERS 0:00 Zero dollars a month 0:44 The house, four ways 2:32 The cash flow ladder 4:04 Why: the bank's dollar against yours 6:12 Quick word 6:51 Your math, not the lender's 8:40 Ten years, the house against the market 12:15 The income test 13:20 What I'd tell you across the desk 16:01 Four things to keep 📅 WORK WITH ME — I'm a licensed mortgage loan officer (NMLS 410420) and rentals are most of what I write. Want me to run your house and your cash through all four doors before you commit? Book a free call: https://brokerdave.com/book or email ask@brokerdave.com 🧮 FREE DSCR CALCULATOR — price, rent, taxes, insurance and any down payment in; the full payment, the cash flow and the ratio out: https://brokerdave.com/dscr-calculator 📧 ASK ME A QUESTION — got a question but not ready for a call? Email me and I'll answer it: ask@brokerdave.com 📱 SAVE MY CONTACT — https://lurbee.com/c/david-lurvey 📘 MY BOOK — "DSCR Loans Made Simple: The Beginner's Guide to Financing Rental Property." Qualify on the rent, not your paycheck. Kindle + paperback: https://amzn.to/4gRPRDt SOURCES AND ASSUMPTIONS FOR THE FIGURES IN THIS VIDEO • One worked example: a $310,000 single-family rental, $3,600 a year of property taxes, $3,300 a year of landlord insurance, no association dues, 30-year fixed DSCR loans at 7.25% (20% down), 7.00% (25% down) and 6.625% (50% down), fully amortizing, with a three-year prepayment penalty. The rent, $2,267, is set so the 20%-down payment is covered exactly (a 1.00 DSCR). It is the same math the calculator runs. • The rates are the ones on my sheet the week this was recorded, and they are the highest DSCR rates my sheet has carried in over a year. DSCR rates move daily and are priced by credit score, down payment, ratio and property type. The 1.00 qualifying floor is a lender guideline on most of the programs I write, not a regulation, and yours may differ. • "Your math" takes 5% of rent for vacancy and 10% for repairs and reserves, self-managed. A property manager would add roughly 10% more. • The market side assumes the S&P 500's long-run average total return of about 10% a year with dividends reinvested (7% as the stress case), long-term capital gains of 15% at the end (the rate most people pay; yours may be 0% or 20% plus state tax), and a dividend yield of about 1.2%. The house side assumes 3% a year of appreciation (below the long-run repeat-sales average), flat rents, 7% selling costs, and cash flow held in cash. None of this is a forecast. • Depreciation is straight-line over 27.5 years on 80% of the price as building (IRS Publication 527). Recapture and capital gains apply at sale unless deferred. • A DSCR loan on a rental you don't live in is business-purpose credit (12 CFR 1026.3(a)(1)), which is why no APR is quoted here. • I'm a mortgage loan officer, not an investment advisor. Nothing here is a recommendation to buy any security. David Lurvey | NMLS 410420 | Cornerstone First Mortgage NMLS 173855 | Equal Housing Lender | educational, not personalized financial advice