Larger Home Down Payment or Invest the Money?

It's been bugging me for awhile, and I found a good thread on Young Dreamers that helped me settle this question for now.

When we first talked with our mortgage broker about a loan, he mentioned that he also invested in real estate. We started talking about Robert Kiyosaki and Rich Dad, Poor Dad, and he made the recommendation to us to not put any money down in order to save it as capital for future projects, buy a house, live in it for a year (so we wouldn't have to pay taxes on capital gains), then rent it out. Rinse & repeat.*

That wasn't what we were planning at all. We planned on putting down the largest down payment we could. One of our 2007 goals was to have $40,000 saved for this purpose.

Should we a.) put down the whole $40,000 we've planned to have saved for this goal, or b.) should we put down nothing as the mortgage broker/Robert Kiyosaki convert suggested in order to invest that money in better opportunites for higher returns?

I've decided to go with option C. We are going to put down enough to cover 20% of the home price. So on a $140,000 home we'll only be putting down $28,000. That keeps too much liquid capital from being tied up in the house (and if Hurricane Katrina has taught us anything, it's that our home should NOT be our largest asset).

It also means we won't being paying PMI (private mortgage insurance) - a huge money-waster since it's basically just a penalty fee for having less than 20% equity in your home. We would still have enough capital left over for a downpayment on a nicer home a year later, and of course we'd keep adding to it during the year. The rent money could help pay the new mortgage. **

When I tried to tackle this problem by figuring out which option would leave us richest, I found that there were just way too many variables (home appreciation, interest rates, etc.) that had to be guesstimated. The strategy is kind of middle-of-the-road, and just makes me feel comfortable.

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*Well, we still haven't bought a house, but for personal reasons. Husband and I aren't sure about staying in Big City, USA. Big City also has some major property taxes that actually make renting cheaper (as long as the difference is invested, of course, and you live in a shoebox with low-ish rent.) I did the math on my own, and double-checked myself with Kiplinger's Am I better off renting? calculator. Turns out we'd have to live in a nice starter $140,000 home for 13 years to make it worth our while to buy. We planned on moving well before then.

**Actually, we'll probably be building the second home on property we purchase. Most new $150,000 homes could be built for $100,000; the extra $50,000 is the builder's profit when he sells it!! Or so says my contact in the industry.