One of the most daunting tasks facing a first time real estate investor is dealing with the financing. Banks can very intimidating when you are dealing with their money and unless you know what you want, they will be unable to assist you. Some people advocate putting little to no money down so not to have your own money involved whereas others profess to putting 100% down to avoid the banks altogether. My approach is take a middle of the road approach with 35-40% down for Alberta properties. Here is why:

The properties which have little to no money down will usually not cashflow and hence any market downturn will have a negative impact on these investors the most such as it did in 2008. Putting 100% down is an inefficient use of capital and will result in a rapid depletion of funds which stops you from growing a portfolio.

35-40% down is a compromise between the two extremes and is a good rule of thumb. Banks will usually approve mortgages with this much down and it will most likely cashflow. This amount also takes into account the potential damage that can be brought to investors through unforeseen risks such as derivatives. There heavily leveraged unregulated financial instruments are more plentiful today compared to 5 years ago when the world nearly went into another depression. They also have less reporting restrictions compared to equities which results in more unknown risks. Because of the potential damage they can inflict upon investors, it is better to be safe than sorry when purchasing properties for long term wealth. Also, a positive cash flow portfolio is a form of insurance in the event one has a reduction in their equity position because one can immediately start rebuilding financial losses even if they have not been realized.

In any other marketplace around the world, the down payment should be enough for a property to cover all the monthly expenses (i.e. positive cash flow) and have something still left over. A positive cash flow investment will surely increase the odds of your success!! Investing for equity appreciation only is definitely not recommended.

Please note that publicly traded Real Estate Investment Trusts (REITs) in Canada are known to put 50% as a down payment on their investment properties so they can declare dividends to their investors.