Down Payment

A down payment is the cash a buyer pays toward the purchase price at closing, with the rest financed. It has no effect on a gross rent multiplier, which divides the full price by rent. It does change cash flow and cash on cash return, which is where financing enters the analysis.

A property at a GRM of 10.4 is the same property with 20% down or 40% down. What changes is the mortgage payment and the cash tied up. A larger down payment lowers the payment and can turn negative cash flow positive, at the cost of a lower return on the cash invested.

When a property's GRM is too high to cash flow at a normal down payment, raising the down payment is one way to make the monthly numbers work. It does not make the property a better buy. It moves the investor's own cash into a lower-yielding position instead of into the next deal.

Further reading: Down Payment on Wikipedia.