Investment Property Loans
Rental property mortgages have stricter rules than owner-occupied homes. Compare four common loan types and see which one fits your investment strategy.
Conventional Loan for Rentals
- Down payment: 15%–25% (single-family), 25%–30% (2–4 units)
- Credit score: 680+ (720+ for best rates)
- Interest rate: ~0.75%–1% higher than owner-occupied
- Reserve requirement: 2–6 months of payments per property
- Best for: Long-term buy-and-hold investors with strong credit
DSCR Loan (No Income Docs)
- Qualifying factor: Property cash flow, not personal income
- DSCR ratio: Usually 1.0–1.25
- Down payment: 20%–25%
- Credit score: 660+
- Best for: Self-employed buyers or investors with many properties
Portfolio Loan
- Lender keeps loan in-house instead of selling to Fannie/Freddie
- Down payment: 10%–20%
- Credit score: 660+
- Rates: 0.5%–1% above conventional
- Best for: Investors who want to finance 10+ properties
Hard Money Loan
- Asset-based: Property value matters, not credit
- Down payment: 20%–30%
- Interest rate: 10%–15%
- Term: 6–24 months
- Best for: Flippers or buyers who need to close in under 10 days
Quick Cash-Flow Check
Before you bid, estimate monthly profit:
Rent × 0.75 – Payment – Insurance – Taxes – Repairs = Net Cash Flow
The 25% vacancy/repair buffer keeps you cash-positive even when the roof leaks.
Tax Benefits
- Depreciation: Write off the building value over 27.5 years.
- 1031 Exchange: Sell one rental and roll gains into another—defer taxes.
- Pass-through deduction: Up to 20% of rental income may be tax-free (check with CPA).
Exit Strategy Tips
- Refinance into a conventional loan after 6–12 months of stable rents.
- Keep accurate books—lenders want to see rent rolls and leases.
- Have 3–6 months of reserves per property for vacancies and repairs.